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Visioning the future of soybeans
Published Thursday, March 11, 2010 at 05:39 AM
To create the baseline for the model, QUALISOY evaluated the edible oil sector and soy's stake in that market. In 2004, soybean oil held 80 percent of the market share of edible oil in the United States. As of 2009, that market share had dropped to 69 percent. That translates into a loss of 3.3 billion pounds of oil in five years. Since 2005, canola oil has gained 830 million pounds of the market, and palm oil claimed 800 million pounds while corn, cotton and sunflower oil accounted for 800 million pounds of market share. In addition to losing 2.4 billion pounds of the market to these other oils, soybean oil also lost nearly 900 million pounds of oil, most likely due to the growth in reduced-fat food products, overall consumer awareness of fat consumption. For U.S. soybean farmers, this represents a huge loss in a key market.
Breaking out the edible oils market further, the QUALISOY model evaluated the changes in the "baking and frying" or "hard fat" segment of the oil industry. Prior to 2006, this segment represented 42 percent of the total oil usage in the United-.States. Now, the food industry uses more liquid fats to address the trans-fat-labeling concerns, and this market has declined 3.6 billion pounds since 2004. Soy's share of the remaining 8.4 billion pounds of oil used each year in this market has declined, but great potential exists for high-oleic and high-stearic soybean oils to take back market share from competitors and existing partially hydrogenated soybean oil. According to the visioning model, by 2019 high-oleic and high-stearic oils could replace 5-6 billion pounds of the 8.4-billion-pound market.
If this can be accomplished, it could help raise the prices of soybeans from $.07-$.24 per bushel, raise the price of soybean oil per pound from $.05-$.15 and bring down the cost of soybean meal, a benefit to poultry and livestock producers, from $20-$60 per ton.
Not only will the switch to growing these new traits help maintain soybean prices, but it may also support the overall success of the soybean industry. If U.S. farmers grow enough of the new soybean varieties to fill the market demand potential for these oils they could bring in yearly net returns for all farmers of $397 million to $1.4 billion in additional income. The seed industry could benefit from yearly returns of $89-$109 million, and the processing industry would have yearly returns of $319-$392 million.
U.S. soybean farmers play a critical role in helping the soybean industry retain market share in the edible oil industry and in securing the future success of the overall U.S. soybean industry by being progressive and adopting this new technology as it comes to market.
*Source: QUALISOY Value Chain Analysis Model, Feb. 2010.
Richard Galloway
Q: What makes up your areas of expertise and background in the soybean industry?
A: I have 25 years in the soybean processing and edible oil refining industry and 12 years consulting in soybean processing, edible oil refining and biodiesel industries with a primary focus on market analysis, strategic planning and business management.
Q: As a consultant for QUALISOY, what sort of experience do you bring to the board to help guide its direction?
A: I worked as an executive at two companies (Gold Kist and Quincy Soybean) and have served the boards of directors of two companies. Along with those roles, I've also created three joint ventures: an export trading company, a lecithin manufacturing and marketing company, and an edible-oil-refining business.
Q: Which trait in the new U.S. soybean variety pipeline do you feel has the most value to farmers and why?
A: The U.S. soybean industry has been significantly damaged by government regulations of trans fats, cheap and improved-quality DDGS from the ethanol industry, and cheap and improved-quality canola/rapeseed meal. Traits that address these challenges are all valuable to the soybean industry, especially to the U.S. soybean farmer. While low-linolenic soy has limited effective applications, the 800 million pounds of sustained business it has saved for the soybean industry had a $700-million positive economic impact just on soybean farmers. Future traits, including high-oleic soy and high-stearic soy, will have broader applications and even greater impact. Meal traits are important, too, and need to be thoroughly investigated. It is very difficult to rank the potential traits, because all under consideration will have great positive impact for farmers and industry.
Q: In your research and analysis of the soybean market, what is the potential impact that trait-enhanced soybeans could have on the market?
A: Literally billions of dollars. Soybean oil has lost 3.3 billion pounds of edible oil demand since 2005. Palm oil and canola oil have picked up the lion's share of that lost demand, but some 800 million pounds of edible demand have been lost to the entire industry. Concerns about trans fats have driven food companies away from hydrogenated vegetable oils, in many cases to highly-saturated-fat alternatives. Providing the market and consumers with healthful alternatives will be a boon both to American's healthfulness but also to the U.S. soybean industry's pocketbook.
Q: What would be the number one thing you would want farmers to take away in terms of the work QUALISOY accomplishes on their behalf?
A: Our industry has been damaged by the trans-fat issue. Soy-based solutions exist and are being developed as rapidly as possible. Other new varieties with beneficial traits are also being developed. I hope farmers recognize that they need to be an innovative partner with the rest of our industry in successfully commercializing these traits as they become available.
The QUALISOY Board recently reviewed the existing soybean industry pipeline of upcoming traits that could be incorporated into new, U.S. soybean varieties and has revised that pipeline to more accurately reflect the oil products being commercialized and brought into market.
The revised pipeline includes the following products:
High-Oleic, Low-Linolenic, Lower-Saturate Soybean Oil
The high-oleic oil will have the ability to replace a broader market share of oils used in the baking and frying category than low-linolenic oil and will be more stable for industrial baking and frying applications.
Both Monsanto and Pioneer will have varieties of soybean seed available that fit this oil makeup. The Pioneer oils derived from this new seed will be marketed under the name brand "Plenish" and will be included in Pioneer's Y and M series soybean varieties. The Monsanto varieties will be marketed under their "Vistive Gold" name brand. It's expected that the first of these seeds will be ready for the 2012 crop growing year (possibly later depending on regulatory progress).
High-Stearic Soybean Oil
High-stearic soybean oil proves to be a cholesterol-neutral saturated fat that will provide the baking industry with an oil that could be used as a solid fat but still be trans-fat-free and a healthier alternative.
Increased Omega-3 Soybean Oil
Omega-3 fatty acids can primarily be found in fish oils and serve as an essential nutrient. Soybean oil has the ability to become the best land-based source of omega-3 fatty acids because this trait will help enhance the existing omega-3 content in U.S. soybeans.
These changes in the pipeline reflect the industry's desire to streamline the products coming to market and speed up commercialization of products that have consumer benefits. These traits will be available in new varieties to U.S. farmers for planting starting in 2011 and continuing through 2019.
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