SBG120215 by Farm Business Communications

February 2012

A NEW

WORLD IN 2012

Paul Kremer looks to new markets

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Soybean Guide, February 2012

Contents February 2012

page

The real yield challenge Falling behind When corn is king Soybean outlook 2012 Rising seas Watch that IP market Alien genes Blackmarket soys More acres coming Can the good times last? Growing Canada’s soyfood market

4 8 10 14 16 20 24 26 28 30 32

When change comes

e was an old-timer all those years ago when he first rattled off this farm proverb, but his words seem just as fresh to me now as they did on first hearing, and every bit as worth listening to as well. “The worst thing about agriculture is that it goes in cycles,” he said from the passenger side of the truck. “And the worst thing about cycles is, wherever you are in one, you only see the reasons why it should keep going that way forever.” The reason to remind ourselves of this in 2012 is the corn market. Clearly, every breeze seems to fill corn’s sails. On the market side, ethanol is helping corn hold onto its strength despite the debilitating nervousness of fickle international financial markets. On the production side, corn continues to outpace soybeans, and the gap is getting bigger every year as corn yields continue to grow faster (six times faster, as Philip Shaw writes) than soybeans. Plus, there are indications that we can grow corn on corn without as much yield penalty as we used to face. Maybe that's based more on hopeful thinking than on

proven field results, but it gives even more weight to forecasts for another big jump in corn acres this year. Surely, with all the momentum behind corn, it’s simplistic to say that if everyone is planting corn, it’s time to plant soybeans. Or is it? Well, lets be crystal clear. Any production plan that doesn’t include a healthy proportion of corn this spring is a gamble, and probably not a wise one. That said, however, market volatility and a shrinking acreage mean there’s a realistic outlook for solid pricing opportunities for soybeans this year. As you’ll read in several stories in this special issue, the prospects for soybeans may not be as bleak as we’ve heard. Equally important, as Errol Anderson writes, the outlook for grains including corn may not be as bullish. “Never assume strong markets will hold,” Errol tells us. “They won’t.” But it’s undeniable that soybeans haven’t got all of corn’s genetic gusto, and they don’t have all of ethanol’s octane. But remember what we said. When you’re in a cycle, you only see the reasons why it shouldn’t change, although that’s exactly what cycles do… change. Tom Button, CG Editor

soyguide

The real yield

challenge Boosting those yields isn’t so hard. It’s making it pay that can be tough By Ralph Pearce, CG Production Editor

ere’s the question. How happy are you going to be when you head into your soybean fields with the combine next fall? Will you be pleased, thrilled, disappointed? Soybeans in 2012 are swept up in all sorts of global challenges. There’s the worldwide competition for acres with corn, there’s the impact of financial markets on soybean prices, there’s the impact of Chinese import policies, and much more. But it may be the issue that is closest to home — producing more bushels at a lower per-bushel cost — that is the real tipping point for your year. The spring planting season in 2012 is going to see some hot debates. There are critical questions about whether soybean prices can hold their own against those ethanol-fuelled corn markets, and whether identity preservation (IP) varieties are worth their added management. And those are just the openers. There’s also the consensus that soybean growers haven’t reaped the same steady gains in yield that corn growers have been putting in the bin. In the field, too, soybeans have also struggled against an increase of new and old pests, from soybean aphids and bean leaf beetles to the spread of soybean cyst nematode. Soybeans have been hit harder by weed resistance as well, and myriad diseases continue to threaten every stage of crop development. Continued on page 6

Soybean Guide, February 2012

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But soybeans have also given us grounds for hope. In many years, they’ve been able to tough it out during hot, dry conditions that have made a ropy mess of corn, and some years, soybeans astonish us with their ability to hide an extra five or 10 bushels that we had no inkling of until we started watching the yield monitor. Indeed, the search for higher yields in the past 10 years has led to a number of approaches that may make those surprises more dependable, from seed treatments and inoculants to tillage practices, all in an effort to get yields moving higher, faster. But will those yield boosters pay? That’s a different question. Horst Bohner, soybean specialist for the Ontario Agriculture Ministry wants to improve performance in soybeans. With Dave Hooker of the University of Guelph at Ridgetown, he has been working on two main research projects since 2008 to find a production recipe for higher soybean yields based on a combination of seed treatments, inoculants and spray applications, tillage practices and planting populations. Their ultimate goal is not only to boost yield but also to assess the profitability of such variables, and the two were at the 2012 Southwest Agricultural Conference in Ridgetown to talk about the insights they’ve gained. Right from the start, Bohner and Hooker pointed out that 2011 was a difficult year with numerous anomalies that probably impacted their results. Planting was delayed in many regions of Ontario and the crop was stressed too by drought in June and July. Bohner presented a pictorial comparison of one field in 2010 which was planted on April 29, and which by July 7 had healthy, lush growth and good canopy closure. In 2011, a similarly typical field wasn’t planted until June 22, and by July 7 the plants had barely emerged. In fact, by July 26, the appearance of that field would have scuppered any hope of a decent crop, with sparse and uneven emergence and no amount of canopy closure. But a photo of the same field on August 9 showed the effect of timely rains and adequate sunshine — 14 inches of growth in 20 days. Figure 1 2010 Ridgetown test plot 59 bu./ac. Yield contest 74 bu./ac. winner (Bowmanville) Provincial average 46 bu./ac.

2011 58 bu./ac. 80.2 bu./ac. (Winchester) 45 bu./ac.

* Source: Bohner and Hooker, OMAFRA/UofG

“When you think of what contributes to yield, we often talk about all the stuff we can do early on as it relates to planting, and maybe controlling your weeds,” says Bohner. Most years, however, the bulk of the yield comes straight from crop development that doesn’t occur until after July 15, 6

during the period when the soybean plant is shifting from its vegetative to its reproductive stages, through flowering and pod development and into seed filling. In other words, it happens at a time when most growers aren’t in their fields. From 2008 to 2010, the team’s 22 Strategic Management Adding Revenue Today (SMART) trials produced a 4.4-bushel-peracre yield advantage compared to untreated no-till checks. That earned an extra $48 per acre (assuming a price of $12 per bushel). But — and here’s the shocker — the high-yield plots cost $111 per acre to grow, leaving an operating loss of $63. So the long and the short of it, says Bohner, is that while yield might get made in August, the time for grower action is still early spring, when you can make low-cost decisions. “Our conclusion from that study was that planting date made the big difference for us, and the inoculants plus the seed treatment also had an impact,” Bohner says. In fact, early planting dates seem to be the key, providing it’s combined with the right variety maturity. Using a longer day variety could wind up costing a grower four days for every 100 heat units. That means moving to a variety which is 200 heat units longer could add eight days at the end of the growing season, enough to muddle things in seasons when growers have a tight window for planting their winter wheat which could be a consideration for growers minding their winter wheat. Mining for more Now, Bohner and Hooker are turning their attention to the SMART II trials for 2011-12. According to Hooker, they’re focusing on seed number per square metre, the length of time from reproductive stages R3 to R6, and crop growth rates during that same interval. In theory, the higher the seed number in a given area, the higher the yield. In studying the duration between R3 and R6, the researchers are looking at the theory that the longer the flowers are viable, the more pods will develop. As Hooker points out, this is what accounts for the soybean crop in 2011. A longer R3 to R6 period with more solar energy, timely rains and longer flowering helped the plants compensate for late planting and a compressed vegetative stage. The research team is looking into the use of long day varieties and a combination of seed treatments, inoculants, seeding rates, fertilizers and fungicides. On its own, a longer day variety provided a 2.7-bushel-per-acre gain, worth $30 per acre. A longer day variety plus inputs translated into a yield advantage of 4.1 bushels per acre, worth $45 per acre. But once again, the cost of the seed treatments and inoculant, a higher seeding rate (250,000), 2-20-18 starter fertilizer, ammonium sulphate and ESN plus Quilt and foliar feeding was a combined $137, translating into a net loss of $92 per acre. The message, then, is to watch those inputs with an eye to profitability — and to watch the research too. Hooker and Bohner are determined to boost our yields. SG Soybean Guide, February 2012

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11/01/12 4:56 PM

SOYGUIDE

Falling behind Corn yields are growing six times faster than soybean yields. As producers, can we change that?

t’s a lament heard all across the North American corn and soybean belt. Soybean yields are lagging behind corn. Increasingly, the two crops don’t even seem like they’re competing in the same league. Corn powers its way to great yields year after year. Soybeans surprise us with strong yields — sometimes. More farmers faced with the need for a consistent, dependable crop are choosing corn. As producers, many of us feel corn yields are consistently better over time and soybeans continually give problems. The truth of course probably lies in the middle of that statement, but make no mistake. On most eastern Canadian farms, corn is king. Despite all the bold predictions over the past 20 years, and despite all the progress we’ve made with field management, for most of us it definitely isn’t soybeans. The question is, is the problem because of the soybean genetics, or is it because we farmers still haven’t found the right management package to unlock those genetics? At first glance it may be difficult to place the blame, or even to know how much blame to assess. As farmers, we ask ourselves, have we been made callous by new technologies in other crops that deliver big instant gains, especially in corn, so we don’t notice the steady progress of our year-overyear yield trend in soybeans? Or is there a problem because soybean biotechnology hasn’t caught up to corn traits? Or are soybean yields doomed to play second fiddle to the corn juggernaut? Based on provincial yield testing, soybean yields are increasing at 0.32 bushels per acre per year, Horst Bohner tells me. Bohner is the provincial soybean specialist for the Ontario Ministry of Agriculture Food and Rural Affairs, based in Stratford and he says that, for comparison’s sake, corn yields in Ontario are increasing by 2.0 bushels per acre per year. So it’s true. Corn yields are outpacing 8

By Philip Shaw

soybeans, and if the trend continues, the gap will only get larger. Some might argue that this is unsustainable over time. It certainly creates great challenges for Ontario soybean producers, who have been growing soybeans for a considerable amount of time. With the agricultural economy providing huge cost hurdles to jump over every year, maximizing our financial returns is extremely important. So at the same time that corn yields are outpacing soybeans, it is also becoming more important than ever that as farmers, we get the choice right. In other words, it isn’t just genetics. Economics too are conspiring to make the problem of lower soybean yields even more acute. TIGHT ROTATIONS Bohner says that one of the biggest reasons for the lower rate of growth in soybean yields in Ontario has to do with tight rotations. For instance, in some areas of Ontario it is a fairly standard practice to grow soybeans after soybeans, or in a two-year rotation with wheat or threeyear rotation with wheat and corn. In these scenarios, soybeans are more susceptible to diseases, which keeps a check on soybean yield increases. Bohner says a longer rotation is optimal to enhance soybean yields. Of course in some parts of the East, it’s quite a management challenge to widen out the crop rotation intervals. Bohner agrees, but still repeats that the squeeze on rotations is a major detriment to Ontario soybean yields. Bohner also has some specific comments about the characteristics of the corn plant versus the soybean plant. Corn is a “producer,” he says, and soybeans are better categorized as a “survivor.” In other words, corn produces starch, and can do that with less trouble versus the soybean plant, which produces protein.

As well, soybeans are more of a survivor type of crop because they start with a great amount of potential and “suffer” many yield-robbing factors along the way to harvest. For instance, soybeans produce a lot of energy during the day, but lose significant amounts overnight. Or here’s another example. Soybeans produce a lot of pods, but abort many of them along the way. As well, soybeans fix their own nitrogen, but it takes energy to do this. At the end of the day, the soybean is a plant that has to survive the challenges that confront it in order to go on and produce yield. Corn seems more like the opposite. It’s off to the races unless something holds it back. Of course soybean technology is changing. In Ontario, Roundup Ready II soybeans are consistently outyielding Roundup Ready 1 soybeans in provincial trials by two bushels per acre. That’s a nice gain, but producers still want to know when we will be able to expect 90-bushel-per-acre soybeans on a consistent basis. At .32 bushels per acre per year increase in yield it may take over 100 years to get there. Bohner cautions that it’s hard to forecast long-term yields. One never knows what new technology may come along in the future to help mitigate soybean yield challenges. It may be just around the corner. Soybean Guide, February 2012

ENDLESS PESTS There surely are myriad problems that soybeans face on their road to harvest time. Pests such as the soybean aphid and the bean leaf beetle along with assorted stinkbugs are just some of them. Corn on the other hand has fewer pests, with two of the main ones, European corn borer and rootworm effectively controlled by trait stacked corn hybrids. In part, David Hooker tells me, that’s simply because the corn genome is much easier to work with. Hooker is working on a soybean yield enhancement project called the Smart initiative at the University of Guelph’s Ridgetown campus. Smart stands for Strategic Management Adding Revenue Today. It is a systems approach looking at multiple factors that affect soybean yields and is focused on helping producers deal with the various factors that limit soybean yields. In the first few years of research with the program, Hooker and other growth researchers have seen a boost of four to 10 bushels per acre on various soybean varieties. This has involved, in some instances, juggling some of the multiple factors such as increasing plant population, using fungicides and increasing nitrogen application. The research is ongoing and will surely produce results that we will want to watch in the years to come. Soybean Guide, February 2012

There is a specific need to focus in on the reproductive phase of the soybean plant because this is a phase specifically correlated to soybean yield, Hooker says. To explain, he points to the growing season in 2011 where much of southern Ontario received beneficial rainfall during the critical August period of reproductive soybean growth. This translated into very high yields for many Ontario soybean producers this year. Good conditions with adequate rainfall during the reproductive soybean growth phase result in more seeds per plant, which ultimately adds up to greater yields. Those individual seeds can be heavier too, which has an impact on the yield per acre. Research funding may also be an issue with regard to the difference in soybean and corn yield increases. Hooker says that because the corn genome is so much easier to work with and manipulate, investors can see a more direct route to a profitable return in corn than soybeans. So, by default investment capital flows more freely into corn versus soybeans, and the corn economy builds this into a feedback loop that drives more and more benefits. In other words, if you start out being better at working on corn than soybeans, this gap just grows when you continue to do more corn work.

BACK TO ROTATIONS Yet Bohner and Hooker agree that part of the solution may be up to farmers. It’s that issue of rotations again. Hooker also says good soil quality is a foundation for good soybean yields. Compared to corn, soybeans have a root system that is much more sensitive to fungal organisms and pathogens. That is one reason why continuous soybeans produce lower yields. Hooker says the solution might be to look at a longer rotation with corn, wheat and soybeans. This may mean growing corn two years in a row, although there is a 10 per cent yield decrease associated with second-year corn, so it is a huge management problem that needs to be continually revisited. Still, Hooker says the 150-bushel-peracre soybean yields garnered by Kip Cullers in U.S. soybean fields give a good idea of the soybean’s true yield potential. How about getting those amazing soybean yields in Ontario? Or would we at least be satisfied with soybean yield improvement catching up to the rate of change in corn yields? The challenge of course is to not give up. Soybean yields are increasing. There is a way forward and maybe someday 100-bushel-per-acre Ontario soybeans will be the norm. SG 9

soyguide

When corn is

king

First, do the math. All those acres of corn may be great news for soybeans, shorting the market for your 2012 crop By Ralph Pearce, CG Production Editor

t’s a question that all soybean growers are asking. Does it make sense to keep planting soybeans when the global demand for corn is driving corn prices into a whole new range? It turns out there aren’t any one-sizefits-all answers. On some farms, it may very well be time to scale back on soybean acreage. But on a whole lot of other farms, it’s definitely a year to keep soybeans in the mix. It’s the individual circumstance that determines the answer, our experts say. Are you a farmer with a standard threecrop rotation? Are you aiming at the crush market, or are you contracting food grade? Can you add soybean value with direct delivery? Can beans give you more throughput with your on-farm bin system? For David Kohl, asking whether soybeans make sense in 2012 is just the first of many questions you have to ask, and all of them turn on your own particular needs. “Are you looking at the cash market values or are you looking at the futures? Are they food-grade soybeans that you’re going to be planting?” poses Kohl, the sales and marketing manager with Huron Commodities, in Clinton, Ont. “There are a lot of questions to be asked, and so many variables.” The ground needs to have its say too. Some soils just aren’t big corn producers. In some regions as well, white beans might be a better option. In the end, Kohl believes that if a grower is currently in a three-crop rotation, there is little or no reason to switch 10

to a two-crop operation, even with the current price of corn. “There are more reasons to stay in a rotation, including other returns that benefit the crop,” says Kohl. “It’s just too difficult to make broad-brush statements because we have so many choices. Do it if the math works.” Andrew McVittie sees many of the same factors as Kohl does, particularly where identity preservation (IP) soybeans are concerned. As the buyer of IP soybeans for London Agricultural Commodities, he is also concerned with the current focus on corn and its importance in the market. And like Kohl, McVittie believes most growers should stay the course and maintain their rotations. “Definitely the trend is towards more corn, but there are non-agronomic considerations to be made,” explains McVittie “It’s the individual’s farm and it comes down to the list of decisions that need to be made. Can you grow corn on corn? Yes, but you get into disease issues. It’s much the same as with IP soybeans. It has to be right for your farm.” Other considerations on McVittie’s list include the type of farm operation in question. Is it a full-time farming operation or is the grower involved in an offfarm job? That particular arrangement could affect matters at planting and whether the growers are spreading themselves too thin, affecting everything from germination to weed timing and the overall progress of the crop. From a financial perspective, the clear Soybean Guide, February 2012

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consensus is that the market is encouraging corn. There’s no doubt it’s hungry. For the past two to three years, growers and industry stakeholders have been warned that price volatility is here to stay, and that despite the allure of “beans in the teens,” corn remains the leader in the North American crops sector. Add to that the stream of conference presentations and agronomy updates justifying continuous corn or corn-on-corn management systems, and then add the growth of the Brazilian soybean trade, and it’s easy to see why some growers might begin to question the inclusion of soybeans in their rotations. This doesn’t mean we’ll see an Ontario cropping sector without soybeans. Nobody is forecasting that. But the reality is, the demand for corn continues to rise, in large part due to growth in two key sectors, neither of which is showing signs of a marked change in the short term.

” Definitely the trend is towards more corn,” says Andrew McVittie, but then he adds, “It has to be right for your farm.” In North America, it has been the expansion of the U.S. ethanol industry, which, according to some estimates, now tops 40 per cent of all corn produced in the U.S. [not including estimates of dry distillers grains with solubles (DDGSs) as a byproduct for the livestock sector]. The other growth market comes primarily (but not exclusively) from the industrialization of China’s pork sector. According to reports from Rabobank in early 2011, China is moving away from so-called “backyard farms” to larger, more sophisticated operations requiring consistency and high volumes for feed, which means higher corn production and, at least in the short term, higher corn imports. Rating “the ratio” According to John DePutter, president of DePutter Publishing, the past 30 years have seen a lower-than-normal price ratio of soybeans to corn. Traditionally, it’s expected to sit around 2.5 to 1.0. The rule of thumb has been, if soybeans are worth more than 2.5 times the price of corn, then plant soybeans. If they’re less, then plant corn. The ratio of course has had to be adapted for individual farms to reflect their costs and yields, but as ratios go, it has been remarkably useful. “Lately, nearby soybean futures have been trading at about twice the price of corn, and that’s low,” says DePutter. “The past 30 years, the ratio of soybeans to corn has ranged from a little under two to one, on the low side, to about 3.4 to 1.0 on the high side. The mid range has tended to be around 2.4 to 1.0.” When the ratio is down to its current level of two to one, the market is sending a clear signal to growers that it wants them to plant corn, says DePutter, who agrees that a lot of explosiveness in the corn market is coming from the ethanol boom. “When soybeans are only twice the price of corn, there’s usually more money in corn for most farmers who have the option of growing both crops,” DePutter says. Another wrinkle in the corn production picture is the issue of Argentina. The South American country is now the fifthContinued on page 12

Soybean Guide, February 2012

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Will farmers plant too many corn acres? As analyst John DePutter sees it, “That is the way of world markets.” Continued from page 11

largest producer of corn and the secondlargest exporter in the world. Together with Brazil, the country is experiencing considerable trouble due to dry conditions during the height of its growing season. That could lead to a tightening of corn supplies on a world market level, thus sending an even stronger signal for growers to maintain their acres, if not tweak them a little (or a lot) higher. “Corn supplies in the U.S. and the world are tight,” says DePutter. “They’re tighter than supplies of wheat by far, and at least slightly tighter than supplies of soybeans. Some analysts think corn prices will have to maintain a generally higher average price in relation to soybeans, as well as to wheat, as we move forward. They think the new world order of using corn to make fuel will shift the old price ratios.” Even if that turns out to be the case, DePutter believes the market will do its usual job of offering farmers the signals

(and the opportunities) to grow more corn at one point in time, and then send signals to boost soybeans at other times. He goes so far as to forecast a period within the next year or two, when farmers throughout North America, Europe and northern Asia overdo their corn acres and leave soybeans short on the supply side. “If so, this will cause a shift in the ratio back to higher-priced soybeans in relation to corn,” says DePutter. “That is the way of the world markets, over time.” On a short-term basis, DePutter again points to conditions in South America as having the potential to be an impending opportunity. If the weather remains hot and dry as a result of a La Niña event in the Pacific Ocean, it is likely to affect Brazil’s soybean crop sooner rather than later. That scenario could create a shortage of soybeans on a global level, which in turn could shift that soybean-to-corn ratio from low to high. SG

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Soybean Outlook 2012 The U.S. dollar is the elephant in the soybean market this year By Philip Shaw

espite last year’s tough spring and t h e m i d su m m er d ro u g h t , Ontario soybean growers produced 109 million bushels in 2011 on approximately 2.4 million acres. A decade earlier, in another year with tough weather, we produced a scant 47 million. Clearly, the romance between Eastern Canada’s farmers and the soybean is getting warmer and warmer, so it’s a good thing for our growers that the world has an insatiable appetite for protein, and that soybeans continue to be the oilseed of choice for the consuming world. Both those factors augur well for soybeans in 2012, although they are counterbalanced by growing carry-overs this year. Being the oilseed of choice for a hungry world is a very big deal. Yes, in Western Canada, another oilseed — canola — is a very important part of the agricultural economy, and yes, canola does get traded at a premium to soybeans, with this premium sometimes reaching toward $100 per tonne before soybeans get substituted for the canola. Still, soybeans are the world’s first choice for vegetable oil, and the demand for vegetable oil continues to grow. Burgeoning economies such as China’s have a seemingly insatiable hunger for oil. Basically these countries are turning into buyers for whatever soybeans we can produce. So here’s what makes life interesting. Despite the good news above, soybeans are still a second choice — and sometimes even lower than that — for many Ontario and U.S. corn belt farmers. In plain language, they’d rather plant corn. Corn genetics are improving faster than soybeans. In Ontario, provincial soybean and corn trials show a 0.32-bushel-peracre-per-year increase in soybean yield, compared to a 2.0-bushel-per-acre-peryear increase in corn yields. So, in many

ways, growing soybeans over corn is a leap of faith. (See Falling Behind, page 8.) There are even some observers who argue that South America is better suited to grow soybeans, while North America may be better suited to grow corn. They may be right. At the very least, with South America currently producing 50 to 60 per cent of the world’s soybeans versus 10 per cent of its corn, it’s an argument that is gaining traction. Still, the world’s appetite for protein is strong. Elaine Kub, grain merchandiser and analyst with the ARC Group of Lincoln, Nebraska says world demand for calories is growing even faster than global population. Simply put, people want better diets, meaning they want more meat, and more differentiated food products. World demand for feed grains is growing with that meat demand, and this is also good for global demand of soybeanbased protein feeds. For Canadian soybean producers, consumption trends are also good because of growth in Asian tofu and similar markets. This was brought home to me in a Soybean Guide, February 2012

very personal way some years ago when I met with an Ontario soybean buyer in Singapore. Before I had gotten on the plane to meet him, I had loaded Ontario soybeans from my bins which were destined for Asia. When I met the buyer, he told me that he had eaten soybeans for breakfast that morning, as he always did, and he explained to me how much demand that represents. For an answer, though, he didn’t give me a number. Instead, he pointed out over the city of Singapore, and over the masses of people thronging its streets. From that point forward, I understood, and while that meeting took place 18 years ago, demand has consistently grown ever since. World production for soybeans now stands at 257 million metric tonnes (mmt). The U.S. produces 83.2 mmt, with its competitors producing 173.8 mmt more. Not long ago, the U.S. produced well over half of world soybeans. Now, in 2011-12, Brazil is set to produce 75 mmt and Argentina 50.5 mmt. For the sake of perspective, it’s imporSoybean Guide, February 2012

tant to note that Ontario produces 2.96 mmt. We just are not a big player on the world stage. Despite that, however, we are still very competitive in the markets we serve and there is no reason why that cannot be enhanced. USDA reports serve as a litmus test for futures price movement. The 2012 January USDA supply-and-demand report pegged U.S. soybean production last year at 3.056 billion bushels, up from the December figure but down 273 million bushels from last year. U.S. exports were estimated at 1.275 billion, which is down 226 million bushels from last year. This is a significant decline from last year and reflects not only the drop in production but also the strength in the U.S. dollar that has made American soybeans more expensive on the world stage. Ending stocks for soybeans in the 2011-12 crop year were forecast at 275 million bushels, up from 215 million last year. This actually raised the stocks-to-use ratio to 9.1 per cent. Although this is still considered bullish, it is certainly much more comfortable than last year. The average price projected by the USDA based on their projections in January was US$11.70 per bushel. Unlike the corn market, which is dominated by the United States, South America is increasingly the dominant factor in the soybean complex. In January and February of 2012, the South American soybean crop is maturing and moving rapidly toward harvest in Brazilian and Argentinian fields. South American weather during this critical time is exceedingly important in determining the supply that will end up on world markets. This will also have a large bearing on futures and on cash prices leading up to the spring planting season of corn and soybeans in the United States and Canada. Soybean prices will surely be affected by South American production in 2012. But they will also be impacted by the division of acres planted in the spring of 2012 in North America. Corn stocks are still tight. In fact, the corn stocks-to-use ratio at 6.7 per cent is the lowest since 1995-96. As well, because of ethanol, corn demand continues to build globally, so in 2012 we should expect a larger increase in corn acres in the U.S., possibly up to 94 million, which will need to come from somewhere, most likely soybean acres. A significant decrease in soybean acres in the United States will surely affect prices moving forward. Soybeans are not

nearly as bullish as corn. However, with early 2012 South American weather being very dry, soybean stocks may be compromised further in the lead-up to planting in North America. Price movement coming out of that may be very significant. The January 2012 USDA report increased soybean production slightly for the 2011-12 crop year. Soybean prices fell on the news, but mainly followed corn on the way down. From August of 2011 until the middle of January 2012, soybean futures had actually lost $3 a bushel. This was largely due to the non-agricultural investors leaving agricultural commodities and going into U.S. government securities, which boosts the U.S. dollar. These increased soybean yields in 2011 are now showing up in the soybean market through more bearish soybean futures spreads in deferred months. Darin Newsom, senior grain analyst for Telvent DTN in Omaha says the commercial side of the market is growing more bearish. As a result, the deferred futures months are strengthening, reflecting less demand coming from the commercial side of the market. In other words, commercial end-users are satisfied now with supply and at the present time are not willing to pay more to get old soybeans out of farmers’ bins. Soybean prices in 2012 will surely be impacted by currency manipulations. The elephant in the room is the U.S. dollar, which has been benefiting from speculative capital moving into U.S. treasuries, boosting the U.S. dollar. This is negative for soybean futures prices, making them more expensive on the world stage. At the same time, the Canadian dollar tends to move in an inverse relationship with the U.S. dollar. As the U.S. dollar moves up, the value of the Canadian dollar generally moves down — which is a positive for Canadian cash soybean prices. Even so, the Canadian soybean basis is especially sensitive to currency moves so this will need careful watching. Ontario soybean acreage in 2012 is in flux. Corn acreage is poised to climb beyond two million acres this spring. Winter wheat acreage is approximately 700,000 acres, so in 2012, soybeans will need to compete with corn to maintain acreage. For 2012, Canadian soybean producers need to measure all of the factors affecting the soybean complex, and to watch our production costs. The world loves its soybeans, but growing them profitably is always a challenge. SG 15

soyguide

Rising seas Will all the branding of Canada’s soybeans as the world’s best pay off? This year, we find out By Jeanine Moyer

oybean farmers may feel they’re waist deep this winter with their seed and input choices, but export companies are up to their eyes — sometimes they even feel they’re over their heads — in all the forecasts and all the what-ifs about export marketing for the anticipated 2012 crop. Exporters already know they’re in for a tough year. Start with a strong loonie, then add the impact of higher freight charges. Next, try to forecast the outcome of the commodity competition for acres, and for good measure, make a stab at predicting all the implications of unstable global currency and financial markets. Yet if life looks risky from the sales desk, it’s risky from the tractor seat too, so we asked three soybean export companies to share their fears and hopes for 2012. The cost of a dollar Exporters are always at the mercy of our Canadian dollar, but recent currency fluctuations have wreaked havoc on buyer purchasing power and the value of our Canadian products. Sue Robert, sales and marketing representative from Thompsons Limited of Blenheim, Ont. says the loonie is reducing

the international competitiveness of some of our commodities. The reality is, buyers don’t want to be caught with overpriced product. Exporters no longer have an advantage of a weak Canadian dollar to attract buyers, and with our dollar constantly flirting with par against the U.S. dollar, there is no currency incentive to keep buyers from dealing with our largest competitor south of the border. Making matters worse, the euro has simultaneously experienced significant devaluation versus our dollar. According to Peter Mattsson, VP of export sales at St. Lawrence Beans located in Ste-Marthe, Que., this means that European buyers are facing a reduction in their purchasing power (in dollar terms) by European countries by approximately 10 per cent. The net outcome is more pressure on our exports, Mattsson says. Currency fluctuations and global economic instability feed uncertainty among buyers, and exporters agree that the EU crisis and the U.S. debt juggernaut are negatively affecting sales. “Buyers are demonstrating uncertainty in their purchasing,” says Robert, who notes that while buyers have always been Continued on page 18

Soybean Guide, February 2012

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Continued from page 16

careful, they are watching their pennies now more than ever. Cautious buyers not only affect how much product is purchased, but the premium incentives they are willing to pay to growers too. Robert says there’s a financial limit to what buyers will bear to secure product, and since grower premiums are directly linked to buyer payouts, Canadian growers aren’t likely to see huge increases in premiums in the coming year. “Growers understand that it’s a tough market right now and that maintaining market share rather than offering huge premiums will benefit all of us in the long term,” says Robert. However, strong premiums go a long way to secure product supply, something Martin VanderLoo, president of Huron Commodities of Clinton, Ont. is concerned with, saying strong commodity prices for crops including corn and edible beans are putting pressure on conventional soybean acres. Without some increase in premiums, VanderLoo recognizes, exporters could face supply problems.

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that demand could outstrip supply in coming years if pressure from competing commodities continues. Despite commodity competition, however, VanderLoo is confident conventional IP soybean production will maintain its strength. Farmers will want to keep the rotational benefits of soybeans, he says, and they will also be reluctant to put all their eggs in the corn basket, especially when markets are so volatile. Growers and export companies aren’t the only ones trying to make a profit in the export commodity business. Freight companies have been steadily raising their rates over the past 18 months, putting Canadian export companies at an increased disadvantage over competitors who could already move their soybeans at cheaper rates. “Between the Canadian currency and freight charges, Canadian exporters are having a hard time competing these days,” says VanderLoo. Companies and associations affiliated with the export industry are currently appealing to the federal government for intervention on the rising costs of our Great Lakes transport system.

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Soybean Guide, February 2012

OPPORTUNITIES ABROAD “Our challenge this year is to maintain Canada’s level of exports despite competition and our Canadian dollar,” says VanderLoo. “And we’ve got something to help us — Canada has already done an excellent job promoting our IP soybeans and showing the world our traceability and excellent quality advantages.” There’s no doubt, Canadian exporters, governments and industry have worked tirelessly over the years to position Canada as a leader in IP soybean production and our reputation should help the industry get through this hurdle of currency, global uncertainty, commodity competition and transportation challenges. In fact, VanderLoo says market trends are shifting towards food companies demanding increased traceability, something Canada is already a leader in. “Most Canadian exporters have traceability programs that are second to none, they can track an export container right back to the farmer and exact field,” says VanderLoo. However, he also notes that Canada’s biggest asset could be our biggest threat too, and he is cautiously watching our largest competitors south of the border. U.S. soybean growers are currently challenging Canada’s traceability and quality reputation. Led by the American Soybean Association, the U.S. is actively going after Canada’s market opportunities. Yet Canada may keep one step ahead by building new markets. In particular, exporters have been watching the EU closely for more opportunities and Robert says it’s our traceability system that will open the doors. Looking further abroad, VanderLoo is keeping a close eye on Southeast Asia and countries in close proximity to China for export opportunities. China traditionally exports to Japan, Thailand and Singapore, yet China’s supply of high-quality beans is being redirected for its own domestic consumption, creating a void in market supply. “China’s population is demanding better food quality, which means they have less to sell to other countries,” says VanderLoo. “And that’s where we come in, offering a secure supply to countries previously sourcing from China.” While some countries are demanding higher-quality food, others are going to have a hard time keeping up with growing populations, predicts VanderLoo, noting the world recently welcomed its seven billionth person, and pressure will only increase for Canadian farmers to produce and export more food to meet growing population demands. LOOKING AHEAD There’s no doubt the coming year will bring challenges to exporters, growers and buyers alike, say all of the buyers interviewed for this article. The Canadian conventional soybean market will remain strong, thanks to its outstanding reputation, experienced growers and committed exporters who, despite negotiating an unpredictable market, are constantly watching for emerging opportunities that will benefit all parties. Robert says that while the future holds uncertainty, she still has regular customer support that she can rely on — a sure sign that Canada has an established market and secure foothold for the long term. VanderLoo shares that optimism. He encourages soybean growers to “stay the course,” and continue producing exceptional-quality soybeans for the market. After all, VanderLoo says, “we’re in it for the long term. Export markets are here to stay.” SG Soybean Guide, February 2012

soyguide

Watch that IP market We’re risking our hard-won IP status by chasing short-term corn profits. Maybe it’s time to run counter to the pack By Ralph Pearce, CG Production Editor

here’s no denying it. Corn has outperformed soybeans for the last two years, both in the field and at the elevator. But at a time when many growers are questioning the overall value of soybeans, and when they’re voting with their planters in favour of corn, there are rumblings that maybe we’re throwing out the IP baby with the bathwater — and that we may come to regret it sooner rather than later. Sure, corn on corn is getting easier to pull off. However, there is a contingent — growers, agronomists, seed dealers and buyers — that are worried Canada is sacrificing our stellar international reputation for the sake of a corn market that can’t last. Maybe these IP enthusiasts are smaller in number than the corn crowd, but does that make them wrong? According to multiple sources, the identity-preserved (IP) market for Ontario growers once sat as high as 35 per cent of overall soybean production. Today, that share is roughly 25 per cent. The market has dropped, but still it’s a viable one out of every four acres. 20

For years, agricultural economists and brokers have rationalized the IP sector by noting that a 50-cent or a dollar-per-bushel premium means more on a percentage basis at $5 per bushel than it does at $10. So, now that soybean prices are in the low teens, and now that non-IP soybeans are even easier to grow thanks to the convenience of herbicide-tolerant technologies and the launch of newer, higher-yielding varieties, the question becomes, “Will the added cost and management of IP pay for itself?” After all, IP brings more work with weed control plus elevator discounts for mud tagging (as in the 2011 crop), not to mention the potential for dockage and even rejection by the buyer and elevators. Late in 2011, Pat Lynch acknowledged the difficulty of deciding between Roundup Ready soybean varieties and IP soybeans. Yet when he compares the ease and convenience of the former versus the premiums with the latter, he concludes that it is best for growers to include some IP soybeans in their mix. Lynch is adamant. Growers must con-

tinue to service the market, for he fears that Canada’s reputation as a supplier of high-quality food-grade beans is at stake. “If the Ontario growers abandon it or seriously reduce the acres, it’s not something we can just turn off and turn on again,” cautions Lynch, now an independent certified crop adviser. He concedes that it is much easier to grow GMO soybean varieties and that at current pricing levels, it is easy to see a fairly good return coming out of the field. “However, we have to be thinking long term. We will have harder times back in the crop world. Then we will need the extra revenue from IP soybeans. Ontario has a name for highquality IP soybeans, and we have to work at it.” The bloom off the rose Lynch is far from alone. Despite the ease and convenience of the latest GM soybean varieties, John Cowan agrees that there is too much at stake to give up on IP soys. Yet Cowan understands why market conditions dictate more of what growers will do than any sense of tradition. Soybean Guide, February 2012

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“The market always tells the farmer which direction to go and which direction not to go,” says Cowan, the vicepresident of strategic development for the Grain Farmers of Ontario. “The market is telling farmers to produce more corn and also the price of soybeans is saying that the extra effort and energy required to produce IP soybeans is not what I need right now.” Having said that, Cowan is quick to point out that there are other factors that have the potential to drive growers back to IP markets. From his vantage point, he sees a day when researchers and breeders will begin to differentiate the soybean market, even within the IP sector. “Food health is an obvious way to go. So is exploring some of our domestic markets, and we haven’t even started to tap into the opportunity with what I would call ‘new tastes’ or the taste buds of new Canadians,” Cowan says. The other factor which may become more pressing, both in terms of frequency and intensity, is herbicide resistance, particularly with glyphosate-tolerant hybrids and varieties. The seed and chemical sectors seem to be focused more on developing seeds with the traits that are in demand, while Cowan believes there isn’t the same investment into superior enduse value. Still, the crux of the issue for the short term is staying the course and maintaining IP acres, and Cowan assures growers and buyers that every effort will be made, particularly from the Grain Farmers of Ontario perspective, to maintain and grow the market for IP soybeans. “We’re going to work hard to make sure that we continue to be knowledgeable and good stewards and growers,” says Cowan, adding that traceability and accountability will continue to be hallmarks for Ontario growers. “Every time we can segregate a market, we add value to that market.”

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Broaden the view For Martin Harry, the issue goes far beyond Ontario’s borders. Like Cowan and Lynch, Harry acknowledges the reputation that Ontario IP growers have earned, but he wonders whether there is the understanding among growers of just how far that reputation reaches. Continued on page 22

Soybean Guide, February 2012

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Harry differs on another point too. He thinks growers will stick with IP because they have a passion for it, not just because the economics are a penny one way or the other. “Farmers aren’t going to change, and I don’t want to take the negative point of view, but we’re under pressure, the bookings are slow to come,” says Harry, eastern marketing manager for SeCan. “But on the positive side, there are a lot of open and unbooked acres of beans

through the southwest and through the north. Some are telling me that the corn sales were extremely good for bookings but bean sales have been slower and thus there are open acres.” Whether those acres will go to corn in the spring, or go to IP soybeans or glyphosate-tolerant varieties remains to be seen, and there may be a lot of uncertainty right until the seed is in the ground. For his part, Harry is quick to suggest that many American suppliers are becoming more short sighted. The fact

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our neighbours in the U.S. Midwest are so heavily focused on GM soybeans takes their eyes off Ontario’s place in a global market, which gives us less competition not only in Japan and the Pacific Rim countries, but also in Europe. “There is no other place in the world, in my mind, that is doing as much work on conventional soybeans and coming out with new varieties,” explains Harry, talking of the work being done by Canada’s public-sector breeders and researchers. “Why do I get demand from all of the European countries, looking for conventional soybeans?” Of course, he adds, there’s a danger inherent in our status as a well-known food-grade soybean supplier. More European buyers are starting to ask about us now. But if we have to tell them that we won’t have supply next fall, how long will they keep asking? Still, Harry believes that Ontario’s leadership comes from honest roots. We have a long-standing focus on the conventional sector, along with the temperate climate that helps produce high-quality beans. “Conventional soybeans aren’t new, they’ve been here forever, and they’re the breadbasket for me and my growers,” Harry says. “But even in my system, it’s, ‘What’s new?’” The hard numbers If there is any doubt as to the importance of markets for IP food-grade soybeans, Jim Gowland can help find the right perspective. Gowland not only has a long history as an IP grower, he is the founder and former chair of the Canadian Soybean Council. Gowland takes Harry’s reference to the European market and puts some numbers to it to emphasize its value. “The EU market has grown to nearly 1.2 million tonnes in 2010,” says Gowland, who farms near Holyrood in southern Bruce County. “That has been a very substantial increase in tonnage to the EU in recent years.” On the other side of the world, Japan represents a single market in Asia that is approaching 400,000 tonnes. “And that’s a premium, premium market, there’s no doubt about that,” says Gowland. For that market, adds Gowland, “at this point in time, we’re probably looking at an average of at least $2-per-bushel grower premium at the farm gate — mainly for non-GM white hilum soybeans for tofu, miso and soy beverage production.” Soybean Guide, February 2012

“ I don’t want to take the negative point of view, but we’re under pressure. The bookings are slow.” — Martin Harry, SeCan From a perspective of total global market value, the combination of premium-based soybean markets could pump a minimum of $50 million annually into Canadian growers’ pockets. It’s a strong argument for continuing to build and maintain the Canadian brand, says Gowland, adding to Harry’s comment regarding Canada’s dominance of the IP soybean market, particularly measured against U.S. efforts to increase their market share. “The U.S has been a little more involved in IP soybean production during the last number of years, and is very competitive in the same markets that Canada is involved with,” Gowland says. “However, the Japan food-grade market

Soybean Guide, February 2012

represents a million tonnes and is a fairly mature market, so you’re not going to see too much more growth. But it’s a situation where Canada has grown the Japanese market share to nearly 400,000 tonnes in recent years, and that’s a pretty major achievement.” One thing also worth keeping in mind, in terms of measuring the IP market on a Canadian level is Gowland’s observation regarding total soybean production in the past 10 years. It was not long ago that Canada, as a country, was producing less than three million tonnes of soybeans, annually. In 2010, that number was nearly 4.4 million tonnes and much of that growth in the past five to seven years has come

from Manitoba, with some also grown in Quebec, Prince Edward Island and Saskatchewan. “Certainly the new growth has not been here in Ontario,” Gowland says. At the same time, exports have also boomed, climbing to 2.2 million tonnes in 2010 from 1.7 million tonnes only a few years ago. IP has kept pace, Gowland says. “This equates to 60 per cent of Canadian soybeans being exported.” In fact, it may turn out that IP acres in Ontario don’t fall as much as they climb in other provinces. Nevertheless, these market-watchers say, attention must be paid to maintaining, if not continuing to build, Canada’s IP market. SG

SOYGUIDE

Traits are winners, and genetic diversity is too By Ralph Pearce, CG Production Editor

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hether you’re talking corn or soyb eans, breeders and researchers have done remarkable work in the past 20 years to expand the options for growers. For proof in corn, just think Bt genetics. In soybeans, consider glyphosate tolerance. Now, newer traits have hit the farm, and whether that’s multiple insect resistance in corn or Roundup Ready 2 in soybeans, farmers have been more than willing to fork out for new gene packages that demonstrate real value. Genetics isn’t always the best answer, though. At the same time that we’ve been getting these new genes, science companies in the chemical field have been developing new crop protectants, including herbicides and insectides and, particularly in the past decade, fungicides. And, as if that wasn’t enough, researchers and extension personnel have poked and prodded our fields to find the very best combinations of tillage, planting depth, fertility, planting date and more — all tweaked for specific locations and soil types, and all targeted at maximize performance for the grower. SO, WHAT’S NEXT? Now, we may be reaping more benefits from another source of potential breakthroughs. It’s a source that public researchers are getting better and better at exploiting. In a word, it’s foreign genetics, including genes that descend from the crop’s oldest ancestors in China. For the most part, company researchers are focused either on the big traits, such as Roundup Ready 2, or on the rapid release of commercial varieties, or both. Their goal is a return on corporate investment, after all, so there needs to be market-share results. In university and government programs, however, soybean breeding takes on a different focus. “We are making attempts to access germplasm from other countries, and to bring those new varieties in,” says Istvan Rajcan, soybean breeder at the University of Guelph. In addition to China, breeders and

researchers are acquiring germplasm from Croatia, Japan, Argentina and the U.S. as well. “If we just tested those exotic varieties for yield against ours, they often wouldn’t perform very well because they’re not adapted (to Canadian conditions),” Rajcan says. “But if we make crosses with them, we can generate progeny which will have at least a portion of their genes from those new sources.” This work of trying new germplasm goes on quietly in the background, sometimes yielding positive results while often coming up with nothing. Rajcan for instance has been working on the introduction of new and unique germplasm for nearly 20 years. In the mid-2000s, he introduced European germplasm into Ontario-adapted soybean varieties in an effort to increase the genetic diversity in several Ontario-adapted lines. About the same time, Gary Ablett at Guelph’s Ridgetown campus brought in Chinese germplasm, with similar hopes of enhancing existing varieties. What exactly are they looking for? They aren’t always exactly sure. Some crosses are made with specific objectives, such as improving protein quality, or adding new agronomic genes to drive yield. Yet these researchers say it’s also critical to leave room for a “Eureka!” moment when you suddenly find that a new combination of parents produces an unexpected and unlooked for leap in soybean genetics. “It doesn’t always have to be a trait or a value-added trait,” Rajcan says. “It could be just performance or production — in other words, yield.” When Rajcan or perhaps Elroy Cober, soybean breeder for the federal Agriculture Department at Ottawa cross their Ontario genetics Chinese varieties to access a particular high-oil or highprotein gene, or to incorporate a new kind of resistance to soybean cyst nematode, they inevitably import unexpected genes too, including genes from overseas that no one has ever studied in a Canadian context. Will they improve yield? The odds aren’t good for any particular cross, but Soybean Guide, February 2012

when you do sufficient numbers, all of a sudden the probabilities start lining up in growers’ favour. Do breeders select for specific traits, such as oil, protein, disease resistance or physical growth? Sometimes, but not always, says Rajcan. “We always churn out new varieties that are supported for registration based on merit, and then release them for farmers, replacing the current varieties with new ones,” says Rajcan. “Now, if some of those varieties are the result of crossing with Chinese germplasm and they are another notch higher yielding because of the variation they have, then we’re making progress in the yield as well.” Rajcan notes that public and private breeders share the goal of improved performance, all for the benefit of Canada’s soybean producers. When they’re successful, Rajcan says, you can tell not only because the variety has a long life in the marketplace, but also because it gets used in a lot of other breeding programs. Rajcan holds up OAC Bayfield as one of the success stories from the public sector, but also points to Syngenta’s S03 W4 as a long-standing success from the private sector. “That was one that Don McClure developed, and it’s been around for a while because it’s good,” says Rajcan. “It’s not that Don hasn’t developed better varieties, but when a variety (like S03 W4) creates a market or a niche, and it’s very popular for the export market, then it will tend to stay in the marketplace longer.” Of course, there’s another way to say “stay in the marketplace longer.” It’s simpler too — “more net income for farmers.” SG

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Blackmarket soys Yes, they’re a “niche within a niche,” agrees Paul Kremer, but these Black Pearl soybeans are market winners By Jeanine Moyer

panies, the variety was developed specifically for the food-grade export market, and produces quality soybeans with high yields and strong agronomic properties. Black Pearl was only commercialized in 2011, with assistance from the Grain Farmers of Ontario. A niche market, demand for black soybeans is limited but has definite growth potential, says Richter. Through his research he discovered overseas buyers have been eager to purchase black soybeans, but unable to secure supply. Today, Japan and Southeast Asia provide the largest markets for black soybeans. However, Richter predicts that recent quality and food contamination issues in China, the largest producer and consumer of black soybeans, could soon present new market opportunities for Ontario black soybean growers. China’s problems could benefit Ontario growers if Asian food manufac-

turers are forced to look overseas for higher-quality product. BETTER FOR YOU “It’s the purple colour pigment in the seed coat that makes the soybeans appear black,” says Richter who admits it was the unique colour that first intrigued him to develop the soybean variety. Black soybeans contain similar chemical compounds to blueberries, blackberries and red grapes. Known for their antioxidants, these “black foods” boast health benefits and are considered functional foods. Black soybeans are processed into many food products including soy beverages that are consumed for their health benefits. This “black food” trend began in the late 1980s when red wine became popular for its health benefits and the search started for other dark-pigmented foods sharing similar compounds. Soybean Guide, February 2012

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t’s more than just a health trend, says Eric Richter. Black foods are here to stay, and Richter is convinced they can become a new and dynamic opportunity for Ontario soybean producers. Yet it has taken Richter 13 years now to work on the checklist of jobs for converting that opportunity into a reality. It’s a long list. He’s worked to develop the variety genetics. He’s done market research, identifying potential export buyers, and he has commercialized Black Pearl, a black soybean variety. Richter agrees success takes persistence — but after an exceptional 2011 harvest of Black Pearl soybeans, with strong export demand and the expectation of doubling acres for 2012 — Richter is finally watching his hard work pay off. Only available in Canada, Black Pearl is the first black soybean variety for the 2750-2800 heat unit area. Available to Ontario growers through two seed com-

A NICHE WITHIN A NICHE While the global health trend seems reliable, and while sales of black foods are steadily increasing, there’s still no way to guarantee that the wheels won’t fall off. That’s why Paul Kremer, president of Beechwood AgriServices of Parkhill, Ont., says he is “cautiously optimistic” about the black soybean market. Kremer refers to the black soybean market as “a niche within a niche.” One of two companies holding distribution rights to the Black Pearl variety, Beechwood is being careful not to oversupply the market since there aren’t any alternative high-value markets for black soybeans. Healthy or not, crushers won’t take the black beans due to the colour so Kremer’s only option would be to roast unsold blacks for livestock feed. While Kremer must remain cautious, however, he’s still hopeful the black soybean market will show considerable growth. In fact, entering into such a niche market was a business decision made to differentiate his company from larger exporters.

“Specializing in a niche market allows us to offer unique products to buyers while providing our growers with unique growing opportunities,” says Kremer, who admits that while he doesn’t know where this venture will lead, he is doubling his black soybean acres for 2012. Growers were impressed with Black Pearl’s performance and premiums last year and have all expressed an interest in producing the beans again. And Kremer is happy to accommodate them, saying that experienced IP growers are especially important when handling black soybeans because segregation is so important. After all, a black soybean contaminaSoybean Guide, February 2012

tion within a load of regular-coloured soybeans would certainly stick out. Premiums offered are slightly higher than conventional IP soybeans and competitively priced based on Kremer’s buyers. Black Pearl buyers have also been pleased with the quality of the bean, with test results showing strong proteins, an important feature for soyfood production. Buyers are especially happy to have found a consistent and a guaranteed supply of black soybeans in southwestern Ontario. While the black soybean market still

remains relatively small — i.e. a niche — the Black Pearl soybean variety may have opened fresh opportunities for soybean growers in southwestern Ontario. Regardless of whether the market will offer further opportunities or the black food health trend continues — it shows that a farmer’s determination to develop a new product and open market opportunities to fellow growers and businesses can end up in sales. Next, says Richter, we’ll see it isn’t just a trend. SG

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Manitoba’s first million-acre soybean crop is within sight By Richard Kamchen

anitoba’s soybean growers are poised to smash their acreage records in 2012, with the possibility of breaking the one-million-acre mark in the next three to five years. Soybean acres in the Keystone province have exploded over the last 15 years, from a meagre 3,000 acres in 1996 to a record 587,382 acres in 2011. After a series of spasmodic acreage swings a decade ago, the province’s soybean area has posted gains each year since 2007 when it was 230,000 acres. This spring, growers may plant a new record of 700,000 acres, says Manitoba Agriculture’s pulse specialist Dennis Lange. He notes original projections for 2011 were upwards of 650,000 acres, although a wet spring derailed some of those acres. At the pace Manitoba growers have been adopting soybeans, the province is on track to potentially supplant Quebec as Canada’s second-largest soybean producer, Lange says. “We’re getting earlier-maturing varieties coming along every year,” Lange says, “and we’re in a bit of a transition year this year, going from the Roundup Ready 1 28

More acres coming varieties into Roundup Ready 2 in 2012, so there are going to be a number of new varieties being planted by producers.” Ron Frost, analyst for Frost Forecast Consulting, originally pencilled in a conservative figure of 550,000 acres for 2012, but then upped that estimate to somewhere between 600,000 to 650,000. Still, he’s a little more bearish than some, he says, because of strength in the pricing of many of the other crops that Manitoba farmers can grow. “Everybody is going to do their homework a little more carefully than last spring, when basically everything was extremely profitable,” says Frost, who believes corn, oats and edible beans will compete with soybeans for acreage. An open market for wheat might also lure a few acres away, although if it happens, that’s more likely to develop gradually over the course of three to five years, Frost says. One scenario is that open competition in wheat markets could lead to more investment in wheat breeding, which would then lead to varieties which are better able to compete for acreage against soybeans. Such what-ifs, however, will take years to play out.

“It depends on some of the new varieties of wheat that come out,” says Frost. “We’ve had some major challenges with fusarium in wheat.” Even so, Andrew Saramaga, president of the Manitoba Pulse Growers Association, doesn’t expect any major shift to wheat after farmers look at their cost-ofproduction numbers and factor in the cost of fertilizer for growing wheat. He expects to see Manitoba soybean acres between 700,000 and 750,000 in 2012. Plus, with the expansion of soybeans farther across the province, acreage could reach a million in the next three to five years with good growing conditions, says Saramaga, who operates a cereals, oilseeds and forage farm northeast of Winnipeg. Should the province maintain 750,000 to a million acres every year, it’ll provide incentive for greater local crush investment, he adds. Frost also believes the million-acre target could be reached — perhaps in five years — but Lange is slightly more cautious. “In order to hit the one-million-acre mark, soybeans will have to remain profitable for growers not only in the core soySoybean Guide, February 2012

bean regions of Manitoba but in the non-traditional areas as well,” says Lange. “The yields in the non-traditional areas combined with market prices will dictate further growth in Manitoba.” SUCCESS STORY Multiple factors have attracted Manitoba growers to soybeans. Lower cost of production is one, especially since farmers don’t need to apply nitrogen. Growers here also haven’t had to deal with many of the disease issues that hamper soybean crops in other regions. “White mould has been fairly limited in Manitoba soybeans, and other diseases like rot are just starting to show up now,” notes Lange, who points out insect problems have been limited as well. “The only real insect problem this year was soybean aphids and even with that, it wasn’t widespread.” Meanwhile, the fact that soybeans can weather wet conditions has been a plus in recent years. Although 2011’s summer was hot and dry, Manitoba has experienced a number of wet growing seasons in years past and soybeans came through with respectable yields, Lange says.

Even this year’s constant weather challenges — a wet spring, hot summer, and early frost — weren’t enough to seriously erode yields. Long-term averages are 30 to 32 bushels per acre, and estimates put the 2011 crop between 28 and 30 bushels per acre, Lange says. “There were some growers who did quite well with soybeans that were above 30 and in some cases approaching 40 bushels an acre,” Lange says. “Overall, I think growers were happy with the crop.” Earlier-maturing varieties have also caught the eye of farmers, helping soybean acreage expand to the western part of the province. Lange notes that in the late 1990s, farmers mostly had access to conventional varieties that were bred for North Dakota production, not Manitoba. “Now they’ve been developing varieties that are suited for our growing region that mature earlier, and that’s helped producers out immensely,” Lange says. “I even have producers talking conservatively about Saskatchewan and Alberta,” adds Frost, who notes research and development progress and tremendous genetics over the last 30 years made canola a major crop in Western Canada.

TIPS AND CHALLENGES For farmers growing soybeans for the first time, Lange recommends they talk to their seed dealer and gather as much knowledge as possible. Make sure you grow a variety that will mature in your area, he says. “Variety selection is always key because with all these new varieties, you really have to look at the information you’re given and try to look at different sources and make your own mind up on what’s going to work for you,” Lange says. Farmers also need to ensure proper inoculation and timely seeding. “For us, we have such a narrow window of planting, any sort of week or two delay of seeding shifts the focus out of soybeans into different crops,” says Saramaga. For producers who’ve already been growing soybeans, Lange urges them to maintain a good rotation to avoid building up disease issues: “We did see some rot this year, and in areas where rotations were a little tighter, that was more pronounced.” SG

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Can the good times last? G By Errol Anderson

lobal financial markets are so volatile, we can’t help telling ourselves. Can we really expect grain markets to have long-term strength when the economic times are so turbulent? My question is slightly different. Can market analysis help us find a commodity market’s long-term direction, when there’s a long-term direction to find? Commodity markets produced many success stories in the last two years, but financial markets have delivered at least as many bumps and bruises. Global credit markets have tightened and Europe’s crisis has been unrelenting. Even American debt continues its spiral. But grains? There are so many mouths to feed out there, we tell ourselves. The world’s population is accelerating, which surely means that demand has got to grow. So grain prices should be strong, shouldn’t they?” Markets can be like a giant puzzle. They can be exciting, intimidating, frustrating and rewarding all within a matter of days. Even better — assuming you like excitement — markets are always moving targets, and commodity markets are the most volatile of all. So let’s take a look at the nature of today’s markets to see if current prices do have long-term staying power. Then we’ll dig into the nuts and bolts of how to market in these volatile times. One point needs to be made loud and

“ Never assume hot markets will hold,” Errol Anderson writes. “They won‘t.”

clear. Typically, bull commodity markets have a short shelf life. They don’t last. Prices soar, but then eventually drop more quickly than they rose. Markets are a reflection of human emotion. The market cycle of greed, followed by hope, fear and panic continually repeats itself. Bull markets always soar to a mighty peak and then collapse, with the peaks often showing a needle-shaped top. Even so, overall grain bids may trade at new, higher levels even after the scare has settled down, and it’s often during these subsequent market rallies that the best selling opportunities are found. Sound crazy? It can be. Opportunities appear, then disappear. Marketing your grain through volatile and uncertain times can be highly stressful, or it can be extremely profitable, depending on how it is handled. Market planning dictates how well a grower handles pricing opportunities and profits. So the question remains, is there a long-term direction in markets? Can they weather the storm of global economic uncertainty? The quick answer is, “it’s unlikely.” 2012 will no doubt be a year of commodity price turbulence. With global economies waning due to excess government and personal debt loads, commodity prices will feel the pinch and strain. In fact, there is a possibility that commodity prices in general may actually turn somewhat deflationary. At the same time, however, we need to stir in weather markets and geopolitical events like Iran. Inevitably, this suggests another year of significant volatility. In this mix, grain prices simply don’t have long-term direction. Pricing opportunities will no doubt appear, but they won’t last. We simply can’t expect market strength to hold for the long haul in a world that is struggling with its economy. Commodity analysts now watch stock markets and currency rates each morning for their influence on commodity prices. And amid tightening monetary policies, the law of substitution will quickly try to compensate for product shortages and oversupply. This is the world we now live in. Key factors that will impact our markets this year include the strength of the U.S. dollar, the price of crude oil, geopolitiSoybean Guide, February 2012

Organic Non-GMO Identity Preserved cal tensions and of course, weather. Despite spiralling American deficits, the U.S. dollar is still a safe haven, meaning the American dollar typically rises as global risk rises. This can act to pressure our Canadian dollar lower, and a falling loonie is ultimately a huge benefit for exporters and manufacturers. Geopolitical tensions such as the Iranian nuclear situation will also impact crude values. Should global tensions heighten, oil prices will rise, but the opposite is true too. When world tensions subside, the premium built into oil values may fade rapidly. The price of crude oil does impact ethanol values which in turn affects not only pump prices but corn prices as well. This movement in currencies and energy prices ultimately affects the health of the North American agricultural markets. So do our markets have long-term direction? Can bull markets be sustained for the long haul? Commodity prices are affected by many global economic factors beyond the law of supply and demand. That’s the new reality nature of our markets. Even so, the old saying that the cure for high prices is high prices will hold true just as the cure for low prices is low prices. The worst business strategy is to be complacent and to do nothing to guard profits. Never assume hot markets will hold. They won’t. Make sure you have a marketing plan in place. Manage your risks. With effective marketing, 2012 will be exciting and profitable. Errol Anderson is author of ProMarket Wire, a daily grain and cattle risk management report. He is also a registered commodity broker located in Calgary. He can be contacted at 403-275-5555 or email; prowire@shaw.ca.

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Growing Canada’s soyfood market

he news on two fronts is very good. Canadian food-grade soybeans have earned a solid reputation in export markets for quality and traceability. Plus, the health benefits of soybeans are getting clearer and clearer, with more than 10,000 scientific articles now published globally citing soy’s inherently healthy lowfat protein, fatty acids, fibre content and antioxidants as evidence that soybeans are a wise dietary choice not only for weight and diabetes management, but also for preventing chronic diseases. Across North America over the past 20 years, there’s been a remarkable repositioning of the soyfoods category. It has shifted from a narrow range of traditional soyfoods found primarily in health and ethnic food shops to a wide array of flavourful, convenient soy products available in mainstream grocery stores everywhere. The fact that soy products are still holding their own and that they are making some gains has many experts believing that the category will continue to grow. In the 13 years between 1996 and 2009, U.S. sales of soyfoods grew from $1 billion to $4.5 billion. This growth was propelled by the USDA’s approval in the late ’90s of a labelling claim for the health benefits of soy protein. The cross-border effect also boosted

It’s no longer a question of whether the soyfood will grow, but which products will grow fastest

By Mary Wiley Canadian sales along with our product offerings and distribution, driving the category from $150 million to over $350 million with 70 per cent of sales being through major grocery outlets. The rate of growth has slowed in the past three years however, with a softening of sales for soy beverages and tofu. Recent gains have been in the form of a modest rise in sales of soy-based energy bars and meat alternative products. A 2009 Angus Reid poll showed that when Canadians choose soyfoods, the

main reason is because they see soy as part of a healthy diet. In the U.S., 2010 United Soybean Board research shows that 80 per cent of consumers think soy is heart healthy. They most often associate certain health benefits with soy. In addition to being heart healthy, they see soybeans as low in fat, a source of protein, good for you, and cholesterol lowering. Canadian industry leaders are closely tracking the trends, and they are working to identify emerging opportunities that could give the soyfoods category another big sales boost. The opportunities, they believe, centre on the themes of wellness, product development, ethno-cultural influences and traceability. If the Canadian soyfoods industry positions itself well, what could the future hold? Unmanageable health-care costs are forcing governments at all levels to shift from a conversation about “health care” to “health.” Prevention and control of chronic diseases rooted in obesity and use of tobacco and alcohol are the new major focus. A December 2011 report by Ontario’s chief medical officer of health makes a strong case for putting resources toward Continued on page 34

Soybean Guide, February 2012

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wellness and health prevention, emphasizing that “healthy eating, regular exercise and eliminating tobacco would prevent up to 90 per cent of Type 2 diabetes cases and 80 per cent of coronary heart disease.” AcNow BC is a provincial cross-government health promotion initiative that aims to boost population wellness by supporting schools, employers, local governments and communities to develop and promote programs that will help B.C. citizens achieve some very specific goals, such as “reduce the percentage of B.C. adults who are overweight or obese by 20 per cent.” The current version of Canada’s Food Guide, released in 2007, includes increased and distinct references to soy. The Milk and Alternatives food group includes fortified soy beverage. Soybean oil is recommended as a healthy unsaturated fat. Tofu is depicted in the cover graphics, and the Meat and Alternatives section recommends. “Have meat alternatives such as beans, lentils and tofu often.” With a belief that the market for soy protein is underdeveloped in Canada, and that government support of healthy eating activities is on the rise, Soy 20/20, a Guelph-based soy industry market development body, is leading an industry quest for a Canadian soy-labelling claim. They are working with Agriculture and Agri-Food Canada and industry partners to champion the claim. Some 10 other countries, including the U.S., already have a soy food label claim. In December 2011, after an extensive scientific literature review process, the label claim was filed with Health Canada, according to Jeff Schmalz, Soy 20/20 president. “We expect next steps in the process to take at least a year — probably longer,” says Schmalz, adding, “We predict that such a label claim could boost Canadian soyfoods sales by about 25 per cent.” The proposed claim would allow Canadian soy food and beverage products to carry specific wording about the relationship between soy consumption and lowering blood cholesterol. “Such a health claim would certainly give a boost to sales, but it’s hard to say which segment of the soy food and beverage market it would help most,” observes Peter Joe, president of Vancouver-based Sunrise Soya Foods. “It will depend on the marketing and public relations spend of the individual companies. If such a claim is allowed, it will be interesting to see what effect new tools like social media will have 34

“ We predict that such a label (health) claim could boost Canadian soyfood sales by 25 per cent.” — Jeff Schmalz, Soy 20/20 in driving sales through marketing messages about the goodness of soy.” With manufacturing plants in both Vancouver and Toronto, Sunrise is the leading tofu manufacturer in the country. In the past couple of years, they have introduced individual serving tofu-based desserts and ethnic flavour-inspired ready-to-heat tofu and sauce products. Joe says the desserts are doing well due to their uniqueness, and that marketing the heat-and-serve product line requires consumer education. Looking ahead, Joe says manufacturers will have to be on their toes when it comes to new soyfood product development. “It’s an area that companies have always been working on, but it’s increasingly difficult to develop truly new products,” Joe says. He cites increased competition — that fact that there are a lot more “good-for-you” foods out there now than there were a decade ago — as well as the ever-mounting challenge of dealing with retailers — as part of doing business for branded product manufacturers. With a voice of experience, Joe says, “Any new product takes a lot of marketing dollars.” The Washington-based Soyfoods Association of North America states that having a wide variety of soyfoods on the market will help consumers meet the 2005 U.S. federal Dietary Guidelines that call for eating foods like soy that are high in fibre, omega-3 fatty acids, key vitamins and minerals and lower in saturated fat, cholesterol, and calories. Gary Fread agrees. The Toronto-area food-marketing consultant, former CEO of the Guelph Food Technology Centre and chair of the Soy 20/20 board says, “Traditional growth areas for soyfoods have levelled off. Whether they take off again will depend on how innovative we get with tweaking those products.” Fread sees two areas for growth — the general area of healthier-for-you products, and growing demand for ethnic foods. “All the developed countries are going the route of the global menu, and Canada especially so, with its multi-cultural and ethnic diversity.” Fread points to the blend of different food types that are now in typical Canadian meals, as well as the fusion of flavours and food cultures being expressed in new products such as edamame-based hummus.

“Ten to 15 per cent of consumers are looking for specialty, upscale, artisanal foods, so we need to be looking at that niche as well.” So what does all of this mean to growers? Mark Huston and Kevin Marriott, both board members with the Grain Farmers of Ontario (GFO), have a special interest in soy industry market development activities. Huston, the GFO representative on the Soy 20/20 board, says growers would like to see a specialty soy crush facility established “to better connect the end products to the beans that we grow here, and to utilize fully traceable soy protein and oils in new ways.” “With the IP system in Ontario, we can grow more IP beans more consistently than anywhere in the world,” notes Huston. What has driven development of the IP system, he says, is the fact that “export markets are still vitally important to the industry, with 40 to 45 per cent of what we grow going to export markets in the form of non-GMO, white hylum, larger beans.” Marriott believes the industry should continue to provide accurate, up-to-date nutrition and product information about soy to consumers, and also work with Health Canada to facilitate development of the label claim. “When I go into a grocery store and see the soyfoods section, I’m reminded of how far the industry has come,” says Marriott. “Twenty-five years ago there were barely any soy products in the store, and now all the major chains have a significant soy section.” He also sees the emergence of soy items on Canadian food-service menus as a “bit of a win.” Marriott sees future developments for soy developing “one step at a time.” “Whether it’s tofu, beverages, shakes, protein bars or fresh edamame, soyfoods can serve a wide range of products and tastes,” Marriott says. It’s a positive sign, he says, that soyfood products in Canada are gaining market share, and that new product development is attracting highlevel attention from aggressively managed companies. SG Mary Wiley is a St. Catharines, Ont. home economist, vineyard partner, and agri-food industry communications consultant. She serves as executive director of the Niagara Research and Planning Council, a community-based group that champions evidence-informed planning for a strong, vibrant Niagara.

Soybean Guide, February 2012

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