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Goldsmith is assistant professor of
agribusiness management in the Department of Agricultural and
Consumer Economics at the University of Illinois and a National
Soybean Research Laboratory Fellow in Agricultural Strategy.
The other co-authors for the study were
graduate assistant Ling Bi from the College of Commerce and Business
Administration at the U of I, Associate Professor Jerry Fruin from
the Department of Applied Economics at the University of Minnesota,
and Rodolfo Hirsch from Rabobank in Brazil. Funding was provided by
the U of I Campus Research Board.
"Since the early 1990s, the U.S. share
of world soybean production has declined from about 50 percent to
less than 40 percent," Goldsmith said. "During that time, Brazil's
share increased to more 25 percent, and Argentina's share rose to
nearly 15 percent. Similar changes are under way in the processing
sector."
He notes that this shift has forced the
world's largest soybean processors to remap their global strategies.
"The dominant trend in processing plant
location is a shift away from mature markets, such as in the U.S.,"
Goldsmith said. "In those markets, the plants tend to be older and
smaller, the technology is more dated, farmer suppliers are smaller,
and regional production is flat. By investing in the new growth
areas, companies can employ the latest technologies, improve
economies of scale and have access to growing supply base."
Goldsmith points out that this process
is already under way in the expanding production areas of Brazil and
Argentina.
"The implication is that U.S.
processing assets will be increasingly focused on the domestic
livestock industry and the growing market for differentiated
products, such as isolates, proteins, flours, isoflavones and oils,"
he said. "One major challenge will be to find opportunities for
growth in the livestock industry. For differentiated products, the
challenges will be to refocus on customer service and to find enough
value to offset the industry's maturing traditional market.
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Another outcome of these changes is
that soybean production and processing is shifting to countries that
have weak intellectual property right protections.
"This change is especially significant
because of the widespread availability of Roundup Ready technology,"
Goldsmith said. "The lack of patent protection in Argentina and
Brazil has already accelerated the switch from traditional crops and
pasture to soybean production. The increasing supply of soybeans has
further fueled the expansion of soybean exports, processing
investments and soybean meal exports in those areas."
He adds that Brazil's government
research system continues to invest aggressively in soybean research
and development.
"The combination of varieties adapted
to low latitudes, the plentiful availability of land and the
improving transportation infrastructure has created a favorable
environment for opening new land for soybean production," Goldsmith
said.
Goldsmith emphasizes that, in the long
run, the incentives for soybean research applicable to U.S.
conditions may be dampened if the domestic market growth prospects
are dim and the developing countries where production is expanding
are unable to enforce intellectual property rights.
"Without
growth in research, the risk of soybean diseases would then increase
and production performance would be affected," he said. "The overlay
of processing assets that depend on an abundant supply of soybeans
would in turn be at risk from weakening incentives to conduct
soybean research."
[University
of Illinois news release] |
