Demand for soybeans is diverse and growing fast

Demand for soybeans is diverse and growing fast
DesMoinesRegister.com - Des Moines,IA,USA
... But as US biodiesel production grows, domestic demand for soybeans is increasing, cutting into the amount available for other uses, including exports. ...

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Ogden, Ia. - With soil-clumped roots resting on the ground, the soybean plant stretched chest-high on Gu Zhong as he stood at the edge of a field on the Muench family farm to have his picture taken.

Gu, part of a visiting group of soybean buyers from China, counted 15 pod clusters - more than a soybean plant would produce in China - and he predicted a bumper harvest. Recent crop production projections support his prediction.

That's good news for Mark Muench, a fifth-generation Boone County farmer, and good news for Gu, vice general manager of Guangzhou Green Oil Co., which operates two soybean processing plants in southern China. About half of U.S. soybeans are exported, and China is the United States' No. 1 foreign market.

But as U.S. biodiesel production grows, domestic demand for soybeans is increasing, cutting into the amount available for other uses, including exports. According to the U.S. Department of Agriculture, oil from 8 percent of this year's U.S. soybean crop will be used to make the biorenewable fuel, and that percentage is expected to rise rapidly as more plants open and expand.

Greater demand close to home sits well with Muench, who farms the family's 3,000 acres of crop ground with his father, his brother-in-law, Troy Ferrari, and Mike Rhoades, an agronomist who joined the family business this year.

Two weeks ago, they sold 5,000 bushels of corn to an ethanol plant located 25 miles from the farm. They got nearly 20 cents per bushel more, or 10 percent more, than a local cooperative was paying. That was a fluke - the plant bid up the price to get corn that it needed on short notice - but it illustrated increased market options, Muench said.

In the past, he has hauled grain to Cargill Inc.'s ethanol plant in Eddyville, 130 miles from his farm. Now, two ethanol plants are within 30 miles of his place, with talk of yet another plant being built within six miles. Biodiesel plants also are popping up throughout central Iowa.

"The heyday of agriculture was the 1940s, '50s, '60s, and back then we used (soybeans) here," said Muench, 32. He anticipates a return to a more robust, local market for Iowa's crops. "That's my hope."

At the same time, though, he and other U.S. soybean growers know that they cannot ignore China, the world's most populous nation, whose economy has been growing - and is expected to keep growing - by about 8 percent annually. That poses opportunities for U.S. soybean producers, but it takes effort to win business from China, which also can tap Brazil, Argentina and other soy-producing nations to help supply demand, soybean industry specialists said last week.

Gu was part of a delegation of Chinese soybean buyers who visited the Muench farm northwest of Ogden last week. Before traveling to central Iowa, the group had spent four days visiting farms in Indiana, Illinois and elsewhere in Iowa, where members learned about soybean production and marketing as part of a tour sponsored by the U.S. Soybean Export Council in St. Louis. The group's buying power demonstrates the significance of China to U.S. soybean producers: Annually, the processors represented by the group purchase about $2 billion worth of U.S. soybeans.

Farmers who hosted the group highlighted U.S. soybean yields. The Chinese asked numerous questions about quality and pricing.

"We want Americans to pay more attention to protein," said Chen Jin, a buyer in the Beijing office of Chia Tai Agro-Industry Oil & Fat Business, a division of a Thai agribusiness conglomerate.

She and others asked the Muenches about costs of production, marketing plans and soybean prices. One buyer wanted to know whether $5.80 per bushel would be an OK price for soybeans sold on the local cash market. The farmers explained how hard it would be to turn a profit at that price.

"Most years, we're a nonprofit organization," said Orrie Muench, Mark's father, prompting laughter among the Chinese visitors.

A Deere & Co. combine cost $250,000 new, as did a Deere tractor, both parked on the family farmstead, which was established in 1881. Nearby were a farm chemical sprayer that cost $160,000 and a seed drill that cost $100,000. Soybean seeds cost about $30 an acre, herbicide runs $20 per acre and chemical application costs another $15, the elder Muench said. On average, production costs total about $6 per bushel.

"That's why $5.80 (per bushel) is just an OK price," said Grant Kimberley, market development director for the Iowa Soybean Association in Urbandale, which helped the U.S. Soybean Export Council coordinate the Iowa visits.

The Chinese buyers left on the tour that would take them to more farms in Iowa, Minnesota and the Dakotas, but Muench, his father and Rhoades lingered at the machine shop. They talked about changes in agriculture and what it will take to succeed in farming in the future. Muench is bullish about the growth of biodiesel and other new uses for farm commodities.

"I'm all for exports, but they're so volatile," he said, recalling how soybean prices collapsed in 2004 after the Chinese canceled U.S. soybean orders. "That's why I hope the biodiesel comes on. ... Between ethanol and biodiesel, I think we're on the verge of some good times in agriculture."

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