International Trade, Biofuel Initiatives
Reshaping the Soybean Sector
Mark
Ash and Erik
Dohlman
Increased domestic and global demand over
the past decade continues to pull U.S. soybean production
steadily upward. Rising demand has prompted producers
to shift acres from wheat to soybeans, capitalizing
on the additional planting flexibility provided
since the 1996 Farm Act. Expanding use of corn and
soybeans for domestic biofuel production and global
market trends are likely to influence the future
direction of the soybean sector.
A key concern among U.S. soybean
producers is export competitiveness. Trade has been
constrained by slow import growth in traditionally
strong markets for U.S. soybeans, such as the European
Union (EU), and intensifying export competition
from South American producers. Although as much
as 40 percent of U.S. soybean production is exported,
the U.S. share of the global soybean export market
declined from 60 percent in crop year 1990 to 37
percent in crop year 2005. The main bright spot
for domestic producers is soaring demand in China,
which has now surpassed the EU as the world’s
largest soybean import market.
 |
With the recent escalation of energy
prices, the development of renewable crop-based
fuels is a front-burner issue. In 2005, the U.S.
Energy Policy Act set a requirement for the annual
use of 7.5 billion gallons of renewable fuels by
2012. The Federal Government also introduced a tax
incentive for biodiesel production. Although ethanol
derived from corn will fulfill a majority of the
renewable fuels mandate, these policies will have
both direct and indirect effects on the soybean
sector. Rising demand for corn to produce ethanol
will likely draw cropland away from soybeans, and
soybean producers will be able to sustain production
only by raising yields. However, producers throughout
the highest yielding areas of the Corn Belt may
be lengthening the period between soybean crops
from every other season to once every 3 years. This
practice may make it harder to sustain the long-term
growth of average soybean yields as lower yielding
regions begin to account for a greater
proportion of total acreage. New crop diseases,
such as soybean rust, also pose risks to yields.
While lower soybean acreage stemming
from shifts to corn may dampen export competitiveness,
it should support prices. The emerging demand for
biodiesel may also help buoy prices, since U.S.-produced
biodiesel is derived primarily from soybean oil.
However, many infrastructure and logistical issues
remain before biodiesel fuel use becomes widespread
in the United States.
|
Download PDF version