We’ve got a serious disconnect in the soybean value chain.
At the Illinois Soybean Association’s “What’s in a soybean? What’s in it for you?” event, I learned the first three links in the chain get paid for yield – the seed company, farmer and grain elevator.
Once the soybean processor gets a hold of those soybeans, yield is a tiny concern compared to protein and oil content. The end user, most likely a poultry farm according to the statistics, cares only about amino acids, the building blocks of proteins.
So, what’s the big deal? The big deal is this: soybean meal from South America comes with a guaranteed 48% protein content. U.S. soybean crushers can only guarantee 47.5% protein, and many times they’re failing to hit that mark.
U.S. protein is inferior to South America for a couple reasons. First, South America has a longer growing season, which inherently translates to more protein. Second, in breeding for more yield, seed companies may have inadvertently selected against protein content.
Folks, this is not a situation where “we’re going to lose market share to Brazil and Argentina.” This is a “we’ve lost market share” situation. At one of the ISA meetings, Bunge representatives reported that Brazil’s soybeans receive a 30-cent premium due to their higher protein content.
So, how do we fix this? That’s where things get even more interesting. First, don’t expect to see that 30-cent premium anytime soon. As one processor put it, “I’m going to buy all the soybeans in a certain region anyhow. Why would I want to pay more for some of them?”
O.K., so maybe the fix should start with the seed companies? Good idea, but farmers are primarily concerned with yield gains when it comes to soybeans. More specifically, they’re upset they’re only gaining 1/3-bushel per year. So, transitioning focus off yield may not be a winning proposition for seed companies.
I’ve been pondering this conundrum for about 24 hours now. I have no earthly idea on how to improve U.S. soybean composition. Is it high time we concede our status as the premium soybean supplier to Brazil? What do you think, can we reverse course on our soybeans’ reputation problem?