Protein plight: Brazil steals U.S. soybean share in
China
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[January 25, 2018]
By Karl Plume
CHICAGO (Reuters) - U.S. soybean growers
are losing market share in the all-important China market because the
race to grow higher-yielding crops has robbed their most prized
nutrient: protein.
Declining protein levels make soybeans less valuable to the $400 billion
industry that produces feed for cattle, pigs, chickens and fish. And the
problem is a key factor driving soybean buyers from the U.S. to Brazil,
where warmer weather helps offset the impact of higher crop yields on
protein levels.
A decade ago, the United States supplied 38 percent of soybeans to
China, the world's top importer, compared to 34 percent from Brazil.
Now, Brazil supplies 57 percent of Chinese imports compared to 31 from
the United States, according to China's General Administration of
Customs.
Soybeans are by far the most valuable U.S. agricultural export, with
$22.8 billion in shipments in 2016. Declining protein levels and market
share pose another vexing problem for soy farmers already reeling from a
global grains glut and years of depressed prices.
The U.S. soybean industry also faces rising competition from a growing
number of synthetic and organic alternative feeds that provide more
protein for less money.

These are troubling trends for the $41 billion U.S. soybean sector, but
the industry's response has yet to take on much urgency. That's because
the erosion of protein levels has come over many years, and many
industry players still have short-term economic incentives to prioritize
higher yields over higher protein.
(For graphic on soybean yield, protein content and market share, see:
http://tmsnrt.rs/2CXgKQE)
Protein levels have fallen as biotechnology and other breeding advances
have pushed yield per acre to record highs, which dilutes protein
content. But U.S. farmers can still make more money producing higher
volumes of lower-protein crops because they only get an additional 3 to
5 cents a bushel for higher-protein beans.
Over the long term, however, falling protein levels could have dire
consequences for the U.S. industry as a whole - especially in China,
which buys two-thirds of all soybeans traded in the world market to feed
its vast livestock operations.
"China needs soybeans, and we're at risk of becoming a residual supplier
if we don't work on protein improvements," said North Dakota farmer
Jared Hagert, a director and past chairman of the United Soybean Board
(USB), an industry association.
HIGHER YIELDS, LOWER PROTEIN
The USB and other industry advocates are starting to take the protein
problem seriously. The industry group will spend $5.6 million in fiscal
year 2018 on research and other efforts to boost protein, up from $3.7
million last year.
They face a tough task. Like many farmers, the agribusiness giants that
develop seed technology, such as Monsanto Co and DowDuPont Inc, have
little incentive to focus on raising protein levels.

Seed developers have had great success boosting yields through
traditional breeding methods and genetic engineering to make crops use
less water, tolerate weed killers and grow better in colder or drier
climates. But they have yet to crack the genetic code that would raise
protein content without hurting yield, seed breeders said.
At DowDuPont, scientists have identified some promising leads in
boosting protein without hurting crop yields, said Steve Schnebly,
senior research manager with the agriculture division of DowDuPont. But
any commercially viable solution could be two decades away, he said, and
isn't a company priority.
"Our major objective to our farmer customers is maximum yield," Schnebly
said.
Monsanto, the world's largest seed producer, currently has no genetic
research projects focusing on elevating protein, spokeswoman Christi
Dixon said in a written statement.
"Market potential and demand doesn't warrant the R&D investment," she
said.
The protein decline coincides with a rise of cheaper and more abundant
alternative feeds available to livestock and poultry producers. They
include distillers grains, a byproduct of the ethanol production
process, and synthetic amino acids that are mixed with corn to mimic
soymeal.
Jeff Knott, a swine nutrition consultant and owner of Minnesota-based
Ideal Animal Nutrition, creates recipes with such alternatives for hog
feed used by producers in several Midwest states.
[to top of second column] |

Soybeans being sorted according to their weight and density on a
gravity sorter machine at Peterson Farms Seed facility in Fargo,
North Dakota, U.S., December 6, 2017. REUTERS/Dan Koeck/File Photo

"Compared to 20 years ago, we're probably feeding 70 percent less soybean meal
than we used to," he said. "And it's all economically driven."
LOWER PROTEIN, LOWER EXPORTS
Brazilian soybean producers use the same genetically modified seeds as their
U.S. counterparts, and have also seen a reduction in protein content.
But Brazilian growers retain an crucial edge in protein thanks to warmer weather
and longer days. The nation's soybeans contain 37 percent protein on average,
according to data from Embrapa, the government's agriculture research agency.
That compares to 34.1 percent for U.S. crops in 2017 - a record low, according
to the U.S. Soybean Export Council.
The protein shortfall in this season's crop has prompted U.S. processors such as
Bunge Ltd to cut the amount of protein they can guarantee in soymeal they sell.
Brazil's three-percentage-point protein advantage is plenty enough to sway many
buyers, especially when combined with the nation's recent efforts to expand
production and reduce shipping delays. Since overtaking the United States as the
world's top soybean exporter in 2013, Brazil has boosted production by about 40
percent.
Expanded port capacity in northern Brazil and lower freight costs have widened
the country's advantage in China, said a Brazilian trader with a large exporting
company.
"Brazil's soybeans on average have less impurities and higher protein content,"
said the trader, who requested anonymity because he was not authorized to speak
publicly. "Some destinations will pay a premium for that."
Protein is paramount for Chinese importers, two managers at soy crushing plants
and one soy meal buyer at a pig producer told Reuters in interviews.

"Feed producers mainly consider the cost of the soy meal - the price, and the
amount of protein it contains," said a swine feed buyer who asked not to be
named because he was not authorized to speak. "With more supplies from Brazil
... we don't necessarily need to buy beans from the U.S."
SCRAMBLING FOR SOLUTIONS
The United Soybean Board has launched a pilot project at a small number of
processors and grain elevators - facilities that store and load grain for
shipping - to record and analyze the protein content of soybeans delivered by
local farmers.
The effort aims to provide highly localized data in the hope that farmers will
select seed varieties that produce higher-protein crops and that soybean buyers
will pay them a premium.
Other USB efforts include financing genetics research to boost protein,
including studies by researchers at the University of Illinois and by scientists
at DuPont Pioneer.
"We've got to be cognizant as to what kind of product we are providing the end
user," said Hagert, the USB director.
Another study - conducted by the University of Wisconsin and paid for by the
Illinois Soybean Association and the U.S. Soybean Export Council - suggests that
farmers can better compete with synthetic alternatives by planting beans with a
specific amino acid balance.
Such soybeans can save hog feeders up to $3 a head and save chicken producers 7
cents a bird, said the study's lead author, John Osthus.
"Right now, there are synthetic amino acid companies that are undermining U.S.
market share," Osthus said. "If we don't do something about this, we're missing
a huge market opportunity."
(Additional reporting by Ana Mano in Sao Paulo and Dominique Patton and Hallie
Gu in Beijing; Editing by Simon Webb and Brian Thevenot)
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