Summary of Report
Annual Costs of Additional Soybean Cleaning
Exceed Benefits by at Least $20 Million
AER-736, September 1996 Stock # AER-736. $9.00.
Some foreign buyers prefer cleaner U.S. soybeans, but the costs of additional cleaning would exceed the domestic and international benefits by at least $20 million per year, according to Costs and Benefits of Cleaning U.S. Soybeans: Overview and Implications, AER-736, a new publication that summarizes two other ERS reports. The reports suggest that the U.S. soybean export market can potentially benefit more by improving the protein and oil contents of the soybeans because most importers are unwilling to pay more for cleaner beans.
The other two reports in the series are:
- Economic Implications of Cleaning Soybeans in the United States, AER-737, which focuses on the costs and domestic benefits of cleaning benefits.
- The Role of Quality in Soybean Import Decisionmaking, AER-722, which emphasizes importers' preferences with respect to cleanliness and other quality factors, and assesses the benefits of cleaning soybeans for international markets.
According to the reports, the costs of additional cleaning to lower the level of foreign material in soybeans would exceed the domestic and international benefits by $20 million to $70 million per year, although a figure near the lower end of the range is believed to be more likely. (Foreign material includes plant parts, broken beans, weed seeds, dirt, whole beans, pods, insects, and corn.)
Concern over the quality of soybeans exported by the United States in comparison with competitors' soybeans has increased in recent years. Advocates of tighter cleanliness standards believe that U.S. competitiveness in the soybean market has been reduced due to higher foreign material levels in exported soybeans. In contrast, critics of tighter standards argue that improving cleanliness will increase marketing costs, reduce profits, and therefore diminish U.S. competitiveness.
This report was prepared in response to a request from Congress. ERS conducted the study on the costs and benefits of cleaning soybeans in cooperation with researchers at land-grant universities and the soybean industry. This report is the third in a series which began with wheat and corn.
Selling cleaner soybeans seems to have limited effects in increasing export revenues and in improving U.S. competitiveness in the world soybean market. The possible benefits of cleaner soybeans are a premium of $4-$5 million that foreign buyers would be willing to pay for U.S. soybeans with less foreign material and $2 million additional net gains in terms of potential retention of U.S. market share in a few Asian markets where food use accounts for a large share of soybean imports. The presence of foreign material in soybeans destined for food use can contaminate the end-products and reduce milling yield, and is often associated with low protein content.
For most importers, price was regarded as the most important factor in purchasing decisions. Quality ranks second to price in import decisionmaking, particularly among feed-use buyers, although the two factors are closely related through the crushing margin. Soybean processors in only a few countries indicated a willingness to pay more for cleaner beans, although cleanliness is one of the most important quality characteristics they look for after protein content, oil content, and moisture.
Brazilian soybeans are perceived by foreign buyers to be lower in price, cleaner, and of higher quality both in protein and oil contents than U.S. soybeans. However, some buyers avoid soybeans from both Brazil and Argentina because of a darker soyoil color and a reddish soymeal tint. Others choose to import U.S. soybeans because of the U.S. ability to supply soybeans year-round and the reliability of timely supply--two desirable sourcing factors lacking in competitors' soybeans.
Marketing cleaner soybeans requires more incentives than currently exist in the U.S. marketplace. In addition to mechanical cleaning, the amount of foreign material can be lowered by such production and harvesting practices as drilled planting, herbicide use, and combine adjustment.
Beyond cleanliness, U.S. policy options in regard to improving soybean marketability include changing grades and standards, improving oil and protein yields through plant breeding and genetic research, mandatory testing and reporting of protein and oil contents, and launching an information program to enhance U.S. quality competitiveness.
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Updated: September 13, 1996
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