How U.S. soybeans lost their edge in the global market

Soybeans are one of the most versatile crops in the world, used for food, fuel, and animal feed. They are also a major source of income for American farmers, contributing $124 billion to the U.S. economy in 2022. However, the U.S. has lost its dominance in the global soybean trade, falling behind Brazil as the top producer and exporter of the legume.

The rise and fall of U.S. soybeans

The U.S. was not always a soybean powerhouse. In fact, soybeans were once considered a niche crop that few farmers experimented with in the 1960s. It was only after they realized the potential of soybeans for animal feed, protein use, and export value that they started to increase their production and yields.

How U.S. soybeans lost their edge in the global market
How U.S. soybeans lost their edge in the global market

By the early 2000s, the U.S. was making about $9 billion from all oilseed crop exports combined. By 2021, the cash coming in from soybean exports alone skyrocketed to $26.4 billion, making soybeans the most valuable U.S. agricultural export commodity.

The main driver of this growth was China, the largest importer of soybeans in the world, accounting for about 60% of the total soybean trade. According to data from the U.S. Department of Agriculture (USDA), about half of the value of U.S. soybean exports went to China, making it a crucial market for American farmers.

However, this dependence on a single export customer proved to be risky in 2018, when the U.S. entered a trade war with China and imposed tariffs on each other’s goods. Soybeans were one of the main targets of China’s retaliation, as it slashed its purchases of U.S. soybeans and turned to Brazil instead.

Brazil had been expanding its soybean acreage and production for decades, taking advantage of its low-cost land and favorable climate. By 2018, Brazil surpassed the U.S. as the world’s No. 1 producer and exporter of soybeans, and has maintained its lead ever since.

The challenges and opportunities for U.S. soybeans

The trade war with China dealt a major blow to U.S. soybean farmers, who saw their prices plummet and their stocks pile up. Although the two countries signed a phase one trade deal in 2020 that committed China to buy more U.S. agricultural products, including soybeans, the recovery has been slow and uncertain.

According to USDA projections, U.S. soybean exports will decline by 3% in 2021/22, while Brazil’s exports will increase by 4%. The U.S. share of global soybean exports is expected to drop from 35% in 2020/21 to 32% in 2021/22, while Brazil’s share will rise from 49% to 51%.

The U.S. faces several challenges in competing with Brazil and other suppliers in the global soybean market, such as higher production costs, limited land availability, environmental regulations, and transportation bottlenecks. Moreover, China’s demand for soybeans may slow down as it seeks to diversify its sources and reduce its reliance on imports.

However, there are also opportunities for U.S. soybean farmers to regain their edge in the global market, such as:

  • Improving quality and sustainability: U.S. soybeans have a reputation for being high-quality and consistent in terms of protein content and oil composition. They also have an advantage in terms of sustainability, as U.S. farmers use less land, water, and energy per unit of output than their competitors. These attributes can help U.S. soybeans appeal to more discerning and environmentally conscious customers around the world.
  • Expanding into new markets and uses: Besides China, there are other potential markets for U.S. soybeans, such as Southeast Asia, Europe, Africa, and the Middle East. These regions have growing populations and incomes that increase their demand for food and feed products that contain soybeans or soybean derivatives. Moreover, U.S. soybeans can also find new uses in biofuels, bioplastics, and other industrial applications that offer higher value and lower environmental impact.
  • Innovating and collaborating: U.S. soybean farmers can leverage their strengths in research and development, technology adoption, and data analysis to improve their productivity, efficiency, and profitability. They can also collaborate with other stakeholders in the soybean value chain, such as processors, traders, and end-users, to create more value-added products and services that meet the needs and preferences of different customers.

Soybeans are a vital crop for the U.S. economy and the global food system. However, the U.S. has lost its dominance in the global soybean trade, as Brazil has emerged as the top producer and exporter of the legume. The U.S. faces several challenges in competing with Brazil and other suppliers, but also has opportunities to regain its edge by improving quality and sustainability, expanding into new markets and uses, and innovating and collaborating.

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