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Corn+Soybean Digest

Bullish on Beans

Soybean demand is growing the fastest of any crop in the world today. A growing appetite for meat in developing countries ensures that this trend will continue for some time, says John Baize, a veteran international ag trade analyst and soybean industry consultant. His firm, Baize & Associates, is an international agricultural trading and policy consulting firm specializing in the oilseeds sector, particularly soybeans. Baize previously ran the American Soybean Association Washington office for 10 years, and was an agriculture policy analyst on Capitol Hill.

Globally, growth in soybean demand is double that of corn and huge compared to that for wheat, he says.

The ailing U.S. livestock industry plus the feeding of DDGs as a soybean substitute has subdued domestic demand for soybeans, Baize says.

“Our biggest challenges for soybean demand are domestic, not international. A lot of good things are going on for soybeans; the global demand is there. We are likely looking at a record year for U.S. soybean production, and South America may have its challenges.

“As beans in the U.S. continue to move north and west, our yields and production grow. Compare this to a potentially bad year in Argentina and flat yields in Brazil,” Baize says.

Increased soybean cultivation in Argentina has hit a wall there, as pest and disease problems like SCN will begin on continuous beans, he says.

“Brazil had a big bean boom in 2004-2006, but that has stopped. Rust has cost Brazil $2 billion annually in lost yield and fungicide treatments, and freight costs for inputs and marketing are killing them. It's customary for them to spray up to six times for rust there. Add to that the rising value of its currency and the low dollar, and Brazil faces some real problems.

“So the juggernaut of soybeans from South America has not materialized, and I'm not sure that it will,” Baize says.

“The export market is so essential to the U.S. soybean farmer. Ninety percent of future demand growth for soybeans will result from growth in livestock production, as developing countries consume more meat,” he says.

CHINA HAS REPLACED the EU-27 as our biggest customer, followed by Japan, Mexico, Taiwan, Thailand, Indonesia, Egypt, South Korea, Turkey, Russia, Iran, Malaysia and Syria.

“China's soybean consumption has grown 3,000% since 1990,” Baize says. “Imagine, China was a net soybean exporter as recently as 1995. It produces 48% of the world's pork.”

Despite the recession, the Chinese GDP will grow by 9% in 2009, Baize says. Today, Chinese in the large cities eat very well, and meat consumption is high.

In 10 years, the world will need an additional 70-80 million metric tons of soybeans. That's the equivalent of many countries' production combined.

“Just think, as much as 40% of China's population has not yet benefited greatly from economic growth; and an even greater share of India's population hasn't either. Add to that growing demand from Vietnam, Indonesia and perhaps Pakistan and the Philippines. They all want more meat in their diets,” Baize says.

“Because corn is freight-intensive, China does not want to import corn, so I suspect it will cut back on soybean cultivation in favor of corn.”

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