Iowa Soybean Review, March 2015 by Iowa Soybean Association

Iowa Soybean Association, 1255 SW Prairie Trail Parkway, Ankeny, Iowa 50023

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INCREASING THE VALUE OF IOWA'S SOYBEANS

ANIMAL AGRICULTURE: March 2015

SOYBEANreview

IOWA

Iowa Soybean Association

March 2015 | Vol. 27, No. 6

10 Meat & Eggs: They're

16 Feeding Demand Expansions at two Iowa feed mills

more pork, chicken and eggs on the menu may be the best recipe to boost soybean prices.

couldn’t come at a better time for row crop farmers.

What’s for Dinner Including

12 Pork Exports Well Done in 2014

The future looks uncertain.

18 Aquaculture: A New Wave of Farming

Aquaculture is on the verge of making a big splash in Iowa.

About the Cover: Iowa Soybean Association board member Scott McGregor of Nashua participated in the United States Meat Export Federation (USMEF) Value Added Red Meat Trade Mission to China and Japan last September. McGregor says there is a strong demand for high quality pork and beef in those countries.

Bringing stories to life. There has never been a more exciting time to be involved in the agricultural industry and we look forward to showing you why with IOWA SOYBEAN ASSOCIATION LIVE — an app that brings stories to life in the Iowa Soybean Review. In three easy steps, you’ll get a more in-depth look at Iowa soybean farmers and stories that affect our lives.

Get the ISA LIVE app. Download it to your Apple or Android device by searching for IOWA SOYBEAN ASSOCIATION LIVE from your app store. Its free!

Once downloaded, start the app and hover over any photo that includes the ISA LIVE icon with your mobile device and the movie will begin to play.

Watch as exclusive stories come to life.

Iowa Soybean Association

EXECUTIVE review Kirk Leeds Chief Executive Officer Iowa Soybean Association kleeds@iasoybeans.com Twitter@kirkleeds

Cubs and Fishing Not sure why, but I have often thought that a great way to spend an afternoon would be to be on a lake listening to a radio broadcast of a Chicago Cubs game with a fishing pole in hand. As a lifelong, suffering Cubs fan, why would I want to add the frustration of another Cubs’ loss to what would be a peaceful afternoon? And when I think about it, I really don’t like to fish, so combining the two pastimes doesn’t really make a lot of sense. So I guess I will just focus on being a Cubs fan this season as this is indeed “The Year” for the Cubs! But back to fishing. In a milestone not widely noted, global farmed fish production now exceeds global beef production. As global demand for animal protein has escalated, the ability of the world’s oceans and lakes to keep up with the demand for fish has been challenged with wild fish production now flat to falling. U.S. soybean farmers have been aware of these challenges for nearly three decades and have been investing checkoff dollars domestically and around the world to

expand the use of the protein from soybeans in feed rations. These efforts have proven successful as we now see nearly 500 million bushels of soybeans used every year to feed fish. Although most of this growth has occurred overseas (particularly in China and SE Asia), we have also seen increased efforts domesically, including Iowa.. This issue of the Iowa Soybean Review focuses on the importance of the livestock industry to Iowa’s soybean farmers. As the leading producer of hogs and eggs, and a major producer of beef, turkey and dairy products, Iowa’s livestock and poultry farms remain critically important to the future of soybean production in Iowa and thus ISA’s goal of improving the competitiveness of Iowa’s soybean farmers. Combining this in-state demand for high quality soybean meal for poultry and livestock with the global demand in farmed fish, the future for Iowa’s soybean industry is indeed a positive one. Now, if the Cubs could just win a World Series title…..

American Soybean Association Directors Ray Gaesser, Corning Dennis Bogaards, Pella Wayne Fredericks, Osage John Heisdorffer, Keota Mark Jackson, Rose Hill United Soybean Board Directors Laura Foell, Schaller Delbert Christensen, Audubon Larry Marek, Riverside Tom Oswald, Cleghorn

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Farmers adopt technology

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ISA Policy Director Carol Balvanz invites farmers to join her at the Iowa State Capitol in Des Moines during the 2015 Legislative session.

Legislation Requires Patience and Persistence By Carol Balvanz, Policy Director

By the time you read this, the Iowa Legislative Session will be more than half over. With the fuel tax issue now resolved, we have moved on to other issues. Each year the ISA Board votes on our priorities for legislative action in January. This year, increasing funding for rural roads and bridges topped the list of action items. Close behind were the issues of additional funding for the Nutrient Reduction Strategy (and possibly creating some new opportunities to engage farmers through tax credits), maintaining our appropriation for the On-Farm Network®, supporting the Iowa State University Experiment Station and gaining funding for a bridge study proposed by the Soy Transportation Coalition. As you can see, our list is fairly long. And even though we’ve had good attendance at Wednesday Hill Visits, it will take more than those discussions in the rotunda to accomplish these goals. That’s where you come in. We believe the best lobbying is done at home. Every weekend, legislators head out of Des Moines and hold one or more forums in their home districts. Those are the contacts that matter most to legislators, and you should plan to become a regular at these opportunities. Ask questions. Get your legislators talking about our issues in front of folks and sharing their views on the value and probability of getting those items to the Governor’s desk. Then follow up with a more personal, one on one discussion before you leave. Offer to provide them more information. Suggest they connect with Jill Altringer or me at the Capitol to learn more about these projects. And

then, call us to let us know you’ve made contact so that we can follow up. Rural legislators tend to agree with our viewpoints—at least in the hometown setting. It might seem to you that we’re a little outnumbered by the urban legislators who may not share the urgency of agricultural issues. That’s one reason we have worked the past two years growing our “Adopt an Urban Legislator” program. We currently have 16 farmers who have gone outside their local districts to get acquainted with an urban legislator within 50 miles of their farm. Through meetings in the summer and during harvest, these farmers develop rapport and friendship with these legislators, becoming a valuable source of information on ag issues. It’s important for urban legislators to hear from farmers because many decisions about bills are made in the caucus meetings in the House and Senate. Urban legislators often listen to other urban legislators. Hopefully those relationships we build outside the legislative session strengthen our credibility and get our ideas mentioned more often in these caucus meetings when our priorities are on the line. At ISA, we don’t endorse candidates, and we don’t collect or distribute political action dollars. We offer credible information and access to farming experience and research. Communicating with legislators is a yearround job. If you can’t make it to Des Moines during the session, please take the time to get to know several legislators and become their info-source on ag issues. As always, if I can help, give me a call.

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SOYBEAN OIL

for Heart Health

s bacon really back? That’s what media headlines have been promising, in response to some recent studies showing no connection between saturated fat and heart disease. But headlines don’t always reflect what the research really shows. It turns out that it is much too soon to say that saturated fat isn’t harmful. It’s true that it’s not the villain we once thought. But it’s not a hero either. What the new studies show is that there is more than one way to eat badly. Eating saturated fat isn’t very good for you, but neither is replacing it with refined carbs—the kind that lack fiber and phytochemicals. The research shows that these foods are just as bad for you, if not worse, than foods packed with saturated fats. So what should we be eating instead of saturated fat? One option is to eat more unrefined plant foods

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with the fiber intact. Another is to choose healthy fats. Until recently, nutrition experts thought that this meant eating more foods, like olive oil, that provided monounsaturated fats. But research has failed to show a protective effect of consuming more olive oil in place of saturated fats. In contrast, studies continue to show that consuming more polyunsaturated fat, like the kind found in soy oil, in place of saturated fat substantially reduces heart disease risk. Soy oil actually has the edge over other oils that are high in polyunsaturated fat, like corn and safflower oils. Soy oil is unique because it’s among the few foods to provide both types of polyunsaturated fats—omega-6 and omega-3. Overall, the evidence supports soybean oil as the oil of choice for promoting heart health.

IOWA FARMER WINS NATIONAL CONSERVATION AWARD The American Soybean Association (ASA) presented Steve Berger from Wellman, the 2015 National Conservation Legacy Award during the annual ASA Awards Banquet last week at Commodity Classic in Phoenix, Ariz. Prior to his recognition as the program’s national winner, Berger was named the Midwest Regional winner of the Conservation Legacy Award. The national award winner is chosen from the regional winners. Other 2015 regional winners are Mike Starkey from Brownsburg, Ind. (Northeast Region) and Jimmy Thomas from Timberlake, N.C. (South Region). One of the first conservation measures Berger remembers experiencing as a child is building terraces. He helped build 15 miles around his fourth generation farm at Dennis Berger & Son Inc., to slow down the impact of the rainfall on soil erosion. Berger farms with his mom, dad and wife on their 2,000 acre soybean and corn operation with 20,000 head of swine. They’ve been heavily involved in soil conservation since the 1960s. The Bergers introduced no-till nearly 40 years ago and cover crops in the last 15 years. Berger said he approaches the farm as a business, science and an art. He believes that farmers must be shown conservation practices can work effectively and economically, so more of them will embrace conservation voluntarily. “It is important to have the farmer teaching, learning and

working with cover crops in modern-day systems,” he said. “It is challenging in today’s farming environment to blend economics and esthetics, but is very rewarding.” The Conservation Legacy Awards Program is a national program designed to recognize the outstanding environmental and conservation achievement of U.S. soybean farmers. A national selection committee, composed of soybean farmers, conservationists and natural resource professionals, evaluated nominations based on each farmer’s environmental and economic program. Along with ASA, the program is cosponsored by BASF, Monsanto, Corn & Soybean Digest magazine and the United Soybean Board/Checkoff.

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FARMER AWARENESS OF NUTRIENT REDUCTION STRATEGY SPIKES, Finds ISA Survey Farmer awareness of the Iowa Nutrient Reduction Strategy nearly doubled during the past year according to a statewide survey of more than 350 farmers funded by the soybean checkoff. This familiarity, say farm and environmental leaders, is key to increasing the pace and scale of adoption of on-farm conservation practices proven to have a positive impact on water quality. The telephone survey was conducted Dec. 17-19 by Iowa-based CampaignHQ and commissioned by the Iowa Soybean Association (www.iasoybeans.com). It found 69 percent of the 353 farmers surveyed were familiar with the Iowa Nutrient Reduction Strategy, up sharply from just 39 percent in 2013. Approved by the Iowa Legislature in 2013, the strategy is a science- and technology-based framework to assess and reduce nutrients from point and nonpoint sources to Iowa waters and the Gulf of Mexico. With specific respect to non-point sources, including agricultural land uses, a suite of infield and edgeof-field practices will need to be implemented to achieve a 41 percent load reduction in nitrogen and 29 percent reduction in phosphorous to meet the aspiring 45 percent reduction goal included in the strategy. Roger Wolf, ISA director of

Environmental Programs and Services (EPS), said a strong upturn in awareness of the strategy bodes well for achieving its goals and improving overall environmental performance. “Awareness is the precursor to engagement,” Wolf says. “Now, it’s about providing farmers with the technical assistance and resources needed to transform this awareness into action.” The ISA survey supports this approach. When asked what information is most valuable to encourage greater participation in the strategy, 73 percent of respondents said providing additional analysis about the cost and effectiveness of individual practices. Sixty-eight percent cited additional information about the strategy while 62 percent value opportunities to view on-farm demonstration practices. Sixty-one percent want more technical assistance. ISA President Tom Oswald says EPS is uniquely poised to provide farmers with the information they need to act. He raises corn and soybeans near Cleghorn. “Adaptive management has always been an important part of agriculture,” Oswald says. “Now is the time for farmers to target specific practices and plans in order to achieve our overall goals for productivity and the

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environment. The EPS team at ISA has 15 years of experience with these practices and can help Iowa farmers meet their goals.” “There is urgency to adopt more conservation practices in more places and at a quicker pace to demonstrate progress,” Wolf says. “To achieve results, it’s critical to be thoughtful in how we proceed,” he adds. “This includes improving overall nutrient and land management in combination with tailoring the use of cover crops, bioreactors, saturated buffers, buffer strips and other practices to proper soil types, hydrology and geology.” Wolf says this is going to be a monumental task and is going to take some time, but the approach is gaining momentum. Last year, nearly 2,400 farmers and land owners invested $22.5 million on conservation practices to prevent soil erosion and improve water quality, of which $13 million came out of farmers’ own pockets. When asked what environmental practices they currently use, 89 percent of respondents to the ISA survey said grassed waterways followed by conservation tillage (69 percent), no-till (61 percent) and terraces (57 percent). Buffer strips were used by 53 percent of respondents while 21 percent said they’ve planted cover crops.

THE GREAT

LIVESTOCK

MIGRATION By Dorothy Tate

The markets are up. Land is available. Processing plants are open. The time is right for livestock to move to Iowa. “Livestock will continue to migrate to land and grain resources,” says Al Patten, vice president at Farm Credit Services of America in Webster City. “These are plentiful in the state of Iowa, so we should see more livestock moving into Iowa in the next few years.” Patten says Iowa continues to offer a number of significant advantages for livestock production, such as readily available and reasonably priced feed sources, land accessibility and proximity to processing facilities. These factors will drive additional livestock production within the state. For those planning to expand due to favorable conditions, Patten offers a bit of financial advice. “Any operation considering an expansion in livestock should evaluate both their capital and labor resources before moving forward,” Patten says. “Two things to keep in mind are that you need to maintain strong levels of working capital and keep fixed costs at a reasonable level because cycles are inevitable and will come again.”

Brain Waddingham of the Coalition to Support Iowa’s Farmers (CSIF) agrees now is a good time to expand Iowa’s livestock sector and says the increased number of calls CSIF has seen supports a migration. “There are unlimited opportunities to grow Iowa’s livestock industry, but farmers have to plan for growth,” Waddingham says. “We go out and meet with a family, sit down with them to understand where they are today and where they want to be in the future. Then our job is to help them get there.” In a time when crop expansion may not be feasible or financially favorable, livestock production supports a migration of another kind — bringing young and beginning farmers back to the operation. “Livestock production is labor intensive and requires daily care for animals,” Patten says. “Young producers often do not have a lot of cash or equity to start their farming careers, but they do have labor which matches up very well with livestock production.” Waddingham indicates the average Iowa farmer may soon start to look a little younger. Almost half of the calls

CSIF receives are from young people — 35 and under — or their parents looking to get the next generation back to the family farm. One such call to CISF came from Tom Wall of Iowa City last year. Wall owned a share in a sow unit and saw building a finisher as a chance to grow the family farm. “For us, expanding was the best opportunity to bring my son back to the farm,” Wall says. “That was really the driver behind our decision to expand.” CSIF helped Wall determine the best site for the 1,200 head building and helped with planning. CSIF also helped Wall set-up an open-house event for neighbors to visit the building after it was completed but before it was filled with hogs. Wall’s advice for others who are planning to expand is to sit down with someone to review the financial numbers and do some forecasting, in addition to working with CSIF, of course. “We worked with CSIF and they were very positive,” Wall says. “We look forward to working with them in the future to plan a windbreak around the new barn.”

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MEAT & EGGS: They're What’s for Dinner By Matthew Wilde

Including more pork, chicken and eggs on the menu may be the best recipe to boost soybean prices. Economists say expansion of the livestock sector — especially poultry and pork, the largest users of soybean meal — will help increase the value of soybeans. That means Iowa soybean farmers better eat more chicken wings, and have a pork chop for desert. “I know what’s going to be on my plate,” says John Heisdorffer, an Iowa Soybean Association (ISA) and American Soybean Association (ASA) board member, grain farmer and contract hog feeder near Keota. “Livestock is a good way to add value to low-dollar soybeans and corn.” Sterling Liddell, senior vice president for food, agribusiness and advisory at Rabo Agrifinance, a leading agricultural lender, projects U.S. poultry production will increase 4 percent this year. That will likely add an extra 15 to 25 cents per bushel to soybean prices due to extra feed demand, he says. Liddell predicts the U.S. hog herd will expand by 3-4 percent, which could add 20 cents per bushel to the value of soybeans.

“What the expansion of poultry flocks and hog herds will do is help cushion the blow by taking more meal out of the equation, thus using more soybeans,” Liddell says. “The more grain prices drop, the more interest in pork and poultry to expand due to improved margins and good demand for protein. There’s going to be a bottom level that’s hard to drop below.” Some financial experts say $8 beans aren’t out of the question this year. Liddell is optimistic that won’t happen. Even though a projected record South American harvest currently underway will continue to add downward pressure, he thinks soybean prices will bottom out in the high $8 to low $9 range as long as China doesn’t curb soybean imports and pork and poultry producers (broilers and layers) keep buying more and more soybean meal. “The future rests with China, they are the driver of the market. The animal feed expansion is the frosting on top,” Liddell says. U.S. Department of Agriculture data confirms livestock producers are in expansion mode. • U.S. layer inventory as of Jan. 1

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totaled 361 million, up 1 percent from last year. Iowa, which leads the nation in egg production, has 59.7 million layers, up 1 percent from the previous month and 3 percent from last year. • U.S. broiler growers placed 175 million chicks for meat production during the third week in January, up 3 percent from a year ago. Cumulative placements from Jan. 10-24 were 527 million, up 3 percent from a year ago. • U.S. market hog inventory as of Dec. 1 was 60.1 million head, up 2 percent from the previous year. The breeding inventory, 5.97 million head, is up 4 percent from last year and up 1 percent from the previous quarter. • Iowa, the nation’s top pork producer, had 20.9 million market hogs and a little more than 1 million in breeding stock, up 3 percent and 4 percent, respectively. • U.S. cattle and calves inventory as of Jan. 1 totaled 89.9 million head, 1 percent more than a year ago. • Iowa has 3.9 million head, up 3 percent from a year ago.

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“

The cure for low prices is low prices.

”

— GRANT KIMBERLEY, ISA Market Development Director

• U.S. milk cow inventory totaled 9.3 million head as of Jan. 1, up 1 percent from the previous year. • Iowa has 210,000 milk cows, up 2 percent from last year. As long as profit margins for livestock producers remain good due to affordable feed and consumer demand for meat, dairy and poultry products stays strong, ISA Market Development Director Grant Kimberley says that bodes well for soybean growers. One of his favorite sayings is, “The cure for low prices is low prices.” Soybean prices have plummeted 40 percent since last spring. March soybeans on the Chicago Board of Trade dropped below $10 per bushel in February following a record U.S. soybean harvest of nearly 4 billion bushels coupled with plentiful supplies worldwide. “If we grow demand for livestock feed here, in China and other parts of the world, that will all add up and make a difference. But it takes time,” Kimberley says. The U.S. soybean crush for the 2014/15 marketing year is projected at 1.78 billion bushels, up from 1.73 billion last year. According to ASA 2014 SoyStats®, U.S. livestock consumed 26.5 million metric tons of soybean meal in 2013. Fifty percent went to poultry, 26 percent to swine, 11 percent to beef and 8 percent to dairy, while other feed and pet food made up the rest. Omaha-based Ag Processing Inc. (AGP) has several soybean crushing plants in Iowa. Matt Caswell, vice president of member/ corporate relations & government affairs, says a healthy livestock

industry benefits soybean growers. “The outlook for soybean meal demand is good in the short and medium term. People want more protein,” Caswell says. That includes customers overseas. AGP ships soybean meal to the Pacific Rim from its export terminal at the Port of Grays Harbor in Washington. Port officials say a record 1.6 million metric tons of agricultural products — primarily soybean meal — was shipped from the facility last year, 18.5 percent more than in 2013. In Iowa, the bright spot for soybean farmers is the growing hog inventory, says Lee Schulz, Iowa State University Extension and Outreach livestock economist. In particular getting porcine epidemic diarrhea virus under control and increases in the breeding herd, which means the industry is in the process of expanding. That will mean a lot more mouths to feed in the future. Schulz estimates each finished hog — average market weight is 287 pounds so far in 2015, he says — consumes about 150 pounds of soybean meal. Heisdorffer doesn’t think it will take as long for soybean prices to rebound as in the past. Supplies may be plentiful, but livestock production is on the rise and plenty of soybeans and soybean meal is being shipped overseas and Mexico to feed animals. The USDA projects U.S. soybean exports at 1.77 billion bushels during the 2014/15 marketing year, up from 1.65 billion the previous year. “I don’t think the dip will last as long,” Heisdorffer says. “We’ll keep seeing an increase in usage of soybeans.” M MA ARRCCHH 22001155 || SSOY OYB BE EA AN NR RE EV VIIE EW. W.C CO OM M || 1 1

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PORK EXPORTS WELL DONE IN 2014 BUT FUTURE LOOKS UNCERTAIN By Carrie Laughlin

Agricultural markets can be as tumultuous as the seas carrying U.S. grain and livestock products to awaiting consumers. Iowa farmers know in order to remain competitive, frequent engagement with international buyers is vital. Iowa Soybean Association (ISA) board member Scott McGregor of Nashua participated in the United States Meat Export Federation (USMEF) Value Added Red Meat Trade Mission to China and Japan last September. McGregor, who raises cattle and row crops, represented the ISA. He was joined by members of the Minnesota Soybean Association, Iowa Beef Industry Council, Nebraska Beef Council, Minnesota Pork Board, Nebraska Pork Producers Association, the Iowa Corn Promotion Board and the Nebraska Corn Board, along with a swine specialists from South

Dakota State University. The goal of the trade mission was to learn more about how these markets impact the U.S. ag economy and to promote U.S. grain and livestock, while personally communicating farming practices and commitment to safe, nutritious food. McGregor says there is a strong demand for high quality pork and beef in Japan. The nation’s economy allows consumers to be particular about the food they purchase. “They’re making more meal decisions on a daily basis,” McGregor says. “They grocery shop multiple times a week, whereas here, we go maybe once a week. Their appetite for U.S. meat products is huge.” John Hinners, assistant vice president of industry relations for USMEF, says export values for both U.S. beef and pork reached new

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heights in 2014. Beef export value increased 16 percent from 2013, totaling $7.13 billion. Pork exports totaled $6.67 billion – an increase of 10 percent, year-over-year. “Exports overcame significant challenges to reach these milestones, including market access restrictions in China and Russia, shipping difficulties due to labor disputes in the West Coast ports and an appreciating U.S. dollar,” Hinners says. Customers paid record prices for U.S. beef and pork while still purchasing larger volumes in 2014. “This is noteworthy because U.S. pork prices were higher than EU prices for most of the year, and U.S. cattle prices were significantly higher than other major beef-exporting countries, such as Australia” Hinners says.

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Looking ahead

Erin Borror, economist for USMEF, said near-term projections for U.S. beef and pork exports to China and Japan are uncertain. West Coast port issues are still causing delays, and customers in Japan are looking to Europe and Canada to fill demand, especially for chilled pork, which has a 45day shelf life. As for China, the economy has slowed — as has the demand for pork — and the U.S. faces numerous market access hurdles. A strong U.S. dollar, especially compared to the Japanese yen, and competition from other exporters are creating challenges. “I’m always a bit nervous this time of year and everyone expects you to have a crystal ball, but this year seems worse than normal,” Borror says. “There’s decent growth in our export markets — looking at 5 percent this year, but that’s being very optimistic, especially since the USDA downed their forecast in their latest report.” Borror says while the mood has darkened since September, in the long-term there is tremendous growth opportunity, especially in China, which has the ability to move an enormous amount of volume. Japan remains the highvalue market, where U.S. pork has the most direct presence to consumers with a strong share of the retail meat case, and plenty of potential for expansion. For 2015, the headwinds are significant, but overall, U.S. pork is again a very affordable protein

source. It’s expected that price competitiveness, despite the strong dollar, will soon help to move larger export volumes.

Making connections

During his time in Asia, McGregor also took part in the third annual U.S.-China Swine Industry Symposium in Beijing, with the emphasis on livestock nutrient management. Presenters from the United States and China shared production practices. China’s government is currently trying to implement environmental regulations. Much of the pork production is located near densely populated areas, instead of out in the country, and waste management has become an issue. “We shared how we handled difficult situations,” McGregor says. “One pork producer explained how we use manure management and just apply the proper amount to the crop, along with the technology we use here to make the hog building comfortable, drinking water accessibility and other husbandry handling techniques they haven’t implemented yet.” McGregor says working with USMEF and other grain sectors on these international symposiums helps get the word out about U.S. grain and livestock. “It’s important to put the farmer behind the story and face with the product, whether it’s beans, beef or pork,” McGregor says. “They like to see our story and our production practices.”

“

It’s important to put the farmer behind the story and face with the product, whether it’s beans, beef or pork.

”

— SCOTT MCGREGOR, Nashua M MA ARRC CH H 220 01155 || S S OY OY B BE EA AN NR RE EV V II E E W. W. C O M | 1 3

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Xueqing (Jane) Li |

Li is a Principal at Ag Food Consulting (AFC), located in Washington D.C. and has nearly 15 years experience in agriculture including extensive knowledge of industry, association and government network in China.

Economic Growth AND CHINA’S Hunger for the Soy Complex By Jane Li

China’s feed industry will move toward increased industrialization and greater production efficiencies to support the forecasted livestock production growth and derived meat demand. Iowa’s soybean industry has the opportunity to leverage this transition to become the preferred protein feed provider in China. The industry can support this by working closely with Chinese feed millers to improve protein inclusions in feed, palatability, flavor and digestibility of soymeal products.

Economic growth — focused on consumer demand

Supported by population growth, urbanization, and income growth, China’s forecasted meat demand is

TH IN SE

INSIDE CHINA

Meat demand rises, so does economic growth

Looking forward, China will continue to be the global engine of growth. The government will shift the country’s primary economic drivers from investment and manufacturing to consumption and service. While projections vary, with institutions like the

World Bank and International Monetary Fund (IMF) projecting between 6 and 7 percent growth, China’s economic growth is officially estimated at 6.8 percent in 2015. This reflects the Chinese government resetting expectations from 30 years of truly outstanding growth of about 10 percent per year. Current administration uses the term “the new normal” to describe current economic growth, implying that the priority is for quality growth rather than growth at any cost. If China is able to convert its growth model to a slower, more sustainable and consumer-focused growth, the opportunities for commodity exporters of the last decade will continue.

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positive. Despite China’s controlled population growth, official estimates forecast the population will reach 1.5 billion in 2020 and 1.6 billion in 2030. China now has 730 million urban residents, representing more than 50 percent of its total population. Projections put the total urban population at 60 percent (960 million) of the total population by 2030. As a result, demand for more and higherquality protein will expand. Some key trends to watch include: • Urbanization and income growth will lead to significant increases in meat consumption. Research shows consumers who live in cities consume twice the meat that consumers who live in rural areas. • Rapid income growth is shifting the Chinese diet away from a high carbbase to higher quality protein. Pork

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will continue to play a central role in the Chinese consumers’ diet, but the growth of restaurants and fast food chains will increase the use and popularity of poultry. Beef and lamb consumption will rise considerably among the broader population, although from a lower base. Midhigh income consumers will also drive a significant boost in fish and dairy consumption. • Chinese consumers will demand more and higher quality meat. A transition from low value cuts and variety meats to high value cuts has already started. Last year, China’s meat consumption appeared to dip. This was due to the slowdown to “the new normal” economy and the country’s aggressive crackdown on corruption. As a result of the crackdown, banquet events for all levels of government have almost stopped. Some in the food industry have commented after years of double-digit growth, the high-end food service sector has undergone a dramatic slowdown in 2014 that will likely continue into 2015. Some express concerns that China’s current meat production and supply are outpacing demand. In fact, China’s government reporting system tends to overestimate production. Demand is underestimated because food consumed outside the home is not included in China’s official data.

Reform and changes

China’s new administration has vowed to push toward agricultural modernization through reform and

innovation. The government has made aggressive moves over the past year and more are expected. Some of the key areas include: • Rural land reform, aiming to promote large-scale farming and consolidate small farmland under larger farm units • Promotion of agricultural technology and increased productivity • Promotion of industrialized agriculture production • Development and implementation of resource efficient and environmentally friendly production China’s livestock industry is undergoing tremendous reform amid unprecedented changes in the agriculture sector. Some of these improvements include: • Expansion of commercialized production: The trend toward commercialization is expected to continue at a faster pace over the next 3-5 years, driven by labor shortages and rising wages, the use of advanced technology (e.g., genetics and nutrition), improved farm management practices, and increased food safety requirements. Larger scale farms are replacing traditional backyard farms. New and emerging features of the industry include scaling up, industrialization, and vertical integration. • Environmental regulations set a high threshold for the industry: Livestock pollution is a focus of China's environmental regulations. In early 2014, China released and implemented the Prevention and

Control of Pollution from Large-scale Breeding of Livestock and Poultry, the first nation-wide, environmentrelated regulation in the agriculture sector to tackle pollution. These and food safety regulations contributed to the closure of 5,000 small and unlicensed slaughterhouses in 2014.

Impact on feed demand and imports

China’s feed industry is also in transition to meet the demand of larger-scale, capital-intensive modes of livestock farming. Official estimates show that feed production was down 1 percent in 2014 to 187 million metric tons. Some industry insiders believe this number underestimates production by not including feed produced by a growing number of vertically integrated facilities. There may be increased efficiency in feed use as companies incorporate technology to produce better feed at lower costs. As the main source of feed protein, demand for soymeal has grown 4-5 percent annually over the past decade. The outlook for China’s corn imports will continue to be a challenge for policy reasons. Large domestic reserves created by government purchases reduce the incentive for corn imports. China’s current GMO approval process and tariff rate quotas on corn imports are likely to slow trade in spite of lower international prices. Trade will also likely continue towards more corn substitutes, including DDGS and sorghum.

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FEEDING DEMAND By Matthew Wilde

EXPANSIONS AT TWO IOWA FEED MILLS COULDN’T COME AT A BETTER TIME FOR ROW CROP FARMERS.

xpansions at two Iowa feed mills couldn’t come at a better time for row crop farmers. Lincoln Supply recently flipped the switch at its new feed mill near Ellsworth to meet increasing demand for turkey and hog feed in the area. Sinclair Elevator near Parkersburg is in the process of building a new mill, expected to be operational by late fall, to satisfy a growing number of hungry hogs in the region. When the Sinclair project is finished, each plant will be capable of churning out 800,000 tons of feed

annually, about double their original capacities. The primary product at both facilities is pelleted hog feed, though mash-type products are available. Lincoln supply, a joint venture between 15 central Iowa turkey farmers and Ag Partners based in Albert City, also makes turkey rations. Commodity prices are at fouryear lows — below breakeven for many producers — following a record harvest nationwide. Global grain supplies are also at comfortable levels. Officials say the mills will generate extra demand for soybean meal and corn that could boost prices.

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Grant Kimberley, Iowa Soybean Association market develop director, says the expansions are a positive sign that better times are ahead. “It’s good for Iowa soybean growers,” Kimberley says. “That means you have additional livestock production, and they are sourcing feed locally. Ultimately, it means the need for more soybean meal.” Lincoln Supply hosted an open house at its new facility on Dec. 11. About 150 to 200 people toured the 160-foot concrete and steel behemoth and learned about its value to livestock and grain farmers and the state.

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Construction on the $20 million project and related facilities began in June of 2013. It was built alongside an existing feed mill that primarily makes turkey feed, along with some for hogs. The new facility can mix a semi-load of feed in less than 8 minutes.

throughout the state, such as Cargill in Iowa Falls and Ag Processing Inc. in Eagle Grove. Both companies purchase corn primarily sourced from local farmers. Due to added demand and competition, Upah and other officials

feed conversion, outpaced capacity faster than anticipated. It’s a good problem to have. “We think it creates another opportunity for local livestock producers, grain farmers and people in the area with new job prospects,”

Together, the distinctive twin towers just off of Interstate 35 are a constant reminder of the importance of animal agriculture. “The more local demand for livestock feed the better because that means more value for our soybeans and soybean meal,” Kimberley says. Sinclair’s new 170-foot concrete mill was poured in December. Additional buildings and equipment need to be built and installed. Lincoln Supply officials estimate their facility will utilize about 160,000 tons of soybean meal made from more than 6.7 million bushels of soybeans and 15-18 million bushels of corn a year — about double the previous amount — when running at full capacity. Sinclair officials say they will use about the same. “It’s going to be a whole new demand point for central Iowa,” says Troy Upah, CEO of Ag Partners. “We’re excited about the number of tons (and bushels) that will be going through this plant. We anticipate this will drive basis levels some.” Lincoln Supply and Sinclair buy soybean meal from crushers

conservatively estimate basis levels in areas where soybeans for soybean meal and corn is sourced will improve 5 to 10 cents per bushel, maybe more. Jim Luebbers, Sinclair Feed Department manager, isn’t ready to estimate how much commodity prices will go up, but he said it’s reasonable to assume they will. “Obviously, the logical answer is the mills will increase the value of commodities in the local areas. We have to be competitive with local buyers, like the ethanol plant in Shell Rock,” Luebbers says. “There’s no question, at least around Parkersburg, there’s added value. Especially in lower transportation costs.” Noel Thompson, an Ellsworth turkey and grain farmer, says Upah’s basis estimate may be low. He’s part of the Lincoln Supply ownership group. “Absolutely we’re creating a lot more demand for soybean meal (and corn),” he says. “We have a facility that creates value in central Iowa.” Lincoln Supply officials say demand for feed within a 100-mile radius of the plant, especially pelleted feed that is easier for hogs to digest and improves

Upah says. “Local stores will be busy. There will be a lot of truck traffic in and out of here.” The Lincoln Supply expansion is expected to create 10 or more new positions. Sinclair’s new mill is projected to create 20-25 new jobs. A United Soybean Board survey, funded by the Soybean Checkoff, indicates the impact of livestock on the nation’s economy is significant. Animal agriculture accounts for nearly 1.7 million jobs, $58 billion in household income and $18 billion in income and property taxes paid. Iowa leads the nation in pork and egg production and ranks 10th in cash receipts for turkeys. According to the survey, livestock accounts for more than $23 billion in economic output, more than 92,200 jobs, about $3.8 billion in household income and nearly $1.5 billion in property and income taxes. The impact of the mill expansions isn’t lost on Iowa Secretary of Agriculture Bill Northey, who attended the Lincoln Supply open house. “It’s a great investment in the future of the industry (and Iowa),” he says.

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By Matthew Wilde

quaculture is on the verge of making a big splash in Iowa. Fish is by far the world’s most popular source of animal protein and the Earth’s oceans can’t keep up, according to aquaculture experts. To feed a growing population hooked on seafood, more farm-raised fish is needed. There’s no reason Iowa, which already leads the nation in pork and egg production, can’t be a top supplier of seafood as well, aquaculture experts say. The state has a long history of productivity and a readily available supply of soybeans — a growing component of fish rations. The Iowa Soybean Association (ISA) devotes tens of thousands of Soybean Checkoff dollars to aquaculture research and development. “It’s an opportunity for us in soybean production and for young people looking for a niche in agriculture,” says Wayne Fredericks, ISA president elect from Osage. The state already has a handful of entrepreneurs leading the way. VeroBlue Farms of Texas is in the process of turning idle manufacturing and warehouse space in Webster City into the nation’s largest indoor

fish farm, a seafood processing and packaging plant and a research and training facility. The company hopes to be fully operational by summer, officials say. It held an open house at the former Beam manufacturing plant late last year. The aquaculture start-up plans to grow, process and sell 8 to 9 million pounds of Barramundi sea bass annually to start. In order to meet that goal, VeroBlue will have 216 10,000-gallon tanks full of fish at its facility and sign up contract growers. Twenty-five is the initial target. “We want to make sure all interests are aligned for a long-term, fruitful relationship,” says John Rea of VeroBlue. The company partnered with Iowa’s First, an aquaculture operation near Blairsburg, and purchased its brand. It’s currently selling Barramundi and building a market. Eventually, the Blairsburg location will be converted into a nursery, which will supply fingerlings to the urban farm and production partners. VeroBlue is currently selling fish to food retailers, restaurants and distributors, like Hy-Vee and Sysco. Demand isn’t and doesn’t expect to be an issue.

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Growth market

Iowa’s aquaculture industry is growing with about 30 producers, records show. One of the newest is Buckeye Fish Company in Radcliffe, headed by Joe Sweeney. The recent college graduate and several farmer partners are in the process of building an indoor fish farm in Radcliffe. They will also raise and sell Barramundi. To spur development of “Iowa’s newest livestock industry,” the Coalition to Support Iowa’s Farmers (CSIF) organized the first-ever Iowa Aquaculture Workshop last fall in Ames. ISA provided lunch and participated in the sold-out event. Topics ranged from global seafood demand and production and industry trends to technical aspects of fish farming and financial risks and challenges of entering a new industry. Brian Waddingham, coalition executive director, says aquaculture is a way for farmers to diversify and grow, especially when commodity prices are low and acquiring land can be cost prohibitive. CSIF’s mission is to advocate and assist Iowa’s farm families in raising livestock responsibly and successfully. “There’s really some exciting opportunities,” Waddingham says.

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“It will help bring sons and daughters back to the farm.” According to Chris Weeks, regional aquaculture Extension specialist at Michigan State University in East Lansing, Mich., seafood demand is quickly outstripping wild caught supplies. Records show world fish production in 2012 was a little less than 140 million tons. About half of the seafood consumed worldwide was wild caught and the other half farm raised, valued at an estimated $135 billion. By 2030, global seafood demand is forecast to increase 100-170 billion pounds and $330 billion. More than 60 percent is expected to be farm raised. “That bodes well for Iowa,” Weeks says. On average, global fish consumption has increased to more than 50 pounds per person compared to 35 pounds of pork, data shows. More than 90 percent of the seafood consumed in the United States is imported. About 4,500 farms raise fish in the U.S. valued at $1.37 billion. Weeks says good opportunities exist, but urged producers to be cautious. “If you’re ready to jump in hook, line and sinker with a bunch of money you need experienced help,” he adds. “If doing this without a lot of background, there’s a minimum

of a two-year learning cycle. Start at a hobby scale, do homework and hone marketing skills and move up from there.” If fish farming continues to catch on in Iowa, Fredericks is excited about future soybean demand. Though fishmeal is still a primary ingredient in fish rations, soybean meal use is increasing due to price and availability. ISA Market Development Director Grant Kimberley says about 500 million bushels of U.S. soy is used for fish feed, one of soy’s fastest growing markets. Iowa farmers produced nearly 506 million bushels last year, records show. ISA District Advisory Council member Brent Renner, a young grain farmer near Klemme, is considering getting into aquaculture with a couple neighbors. Since land values and crop input costs haven’t dropped like commodity prices, he and others are looking for creative ways to support their families. Profit potential is and can be good, officials say. But it takes hundreds of thousands if not millions of dollars, depending on size and financing options, to start a commercial fish farm capable of producing hundreds of thousands of pounds a year. “A lot of people will be looking at other alternatives to make money in the coming years,” Renner says.

Fish is by far the world’s most popular source of animal protein and the Earth’s o c e a n s c a n ’ t k e e p u p.

“IT WILL HELP BRING SONS AND DAUGHTERS BACK TO THE FARM.” — BRIAN WADDINGHAM, Coalition executive director

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AQUACULTURE: International Markets Remain Critical By Joe Murphy

Iowa farmers are constantly looking for new uses for soy internationally and to help promote U.S. grown soybeans farmers and Iowa Soybean Association (ISA) staff members have traveled around the world to attend conferences and tour animal farming operations. Aquaculture has been a buzz word in the United States lately but it is a practice that has been consuming U.S. soy for many years around the world. Countries like Costa Rica, Panama, Ecuador, Philippines, China and Mexico import large amounts of soy to grow tilapia, shrimp and other aquatic species. Molina farms in the town of Jamay, Mexico is a family farm that is doing just that. By importing high quality soybean grain from the U.S. They are creating large profit margins for their fresh tilapia sales and fingerling sales. Molina farms uses fingerling sales to concentrate on the breeding and genetics of the tilapia to gain a premium from other farmers that don't have the facilities or genetics to breed the tilapia. They also sell fresh fish directly to consumers in the region. To keep profit margins as large as possible, Molina invests in high quality U.S. soymeal for his rations and is also using cutting edge technology for the area. "We spend about $1.30 per kilo of tilapia in production costs and can sell the live fish for about $4.00 a fish," Molina says speaking through an interpreter. Molina showed the group the finishing ponds for the tilapia where

about 20,000 fish are grown per 10 foot pond. When the tilapia are ready for market they weigh between 500-600 grams or just over a pound. They use a ration of soybean that is made up of 40 to 50 percent soymeal. Molina said that U.S. soymeal is preferred but due to higher prices they’ve had to import from other South American countries in the past. To fill market demand Molina is also looking at raising shrimp at his farm too. “It will be trial and error at first but USSEC offers excellent information about feed rations and what other farmers are doing to be successful,” Molina says. In Costa Rica, the Rain Forest Tilapia company feeds 15,000 to 18,000 metric tons of soymeal per year to fish at their farms. One hundred percent of that soymeal is imported from farmers in the U.S. The fish grown using U.S. soybean meal are then returned to the states as great tasting fillets that can be bought in Costco and other retail outlets.

Asia

Countries like Vietnam are also increasing their imports of U.S. soybeans for use in livestock and aquaculture operations. According to the U.S. Department of Agriculture, U.S. exports to Vietnam in 2012 reached a record of 461 metric tons (TMT), doubling the amount over the previous year. This year, the country is on pace to import about 500 TMT. “Agriculture in Vietnam is in a

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developing time,” Tran My Hanh the Chief Representative of AGP Office in Vietnam says. “The standard of living is rising so I can see the demand for imports continuing to grow.” Companies like Interflour Vietnam, a state-of-the-art port, stands in contrast to smaller traditionally family owned companies when it comest to handling soybean imports. Inter flour is situated at the mouth of the Saigon River near Ganh Rai Bay and is capable of handling Panamax vessels. The storage capacity at the port is 160,000 metric tons in a 16-bay flat warehouse. The modern facilities, combined with the value of U.S. quality in soybeans has Vietnam prepped to continue growth of U.S. imports over the next few years. “Buyers in Vietnam are starting to be more concerned about the quality of soybeans and not just the price,” Tran My Hanh says. “They know that the quality of U.S. soybeans are superior.” Heather Lilienthal, director of producer services at ISA, attended a recent USSEC tour in Mexico and says seeing the uses of soy imported from the U.S. was fascinating. "This was my first opportunity to visit an aquaculture operation and learn how this family is using soy in its feed," she says. "As they expand their operation and adapt to new technology it reminded me of Iowa farms that are doing the same thing. Everyone is striving to be more efficient in order to meet growing demand for their products."

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BEYOND THE ELEVATOR: USB URGES VALUING SOYBEAN QUALITY EQUAL TO QUANTITY

By Easton Kuboushek

A high yield is not the only factor influencing soybean price and profitability — soybean quality matters. The United Soybean Board (USB) is urging farmers to look "Beyond the Elevator" in 2015 to increase soybean quality content and improve overall global competitiveness. Which do you consider first in your soybean seed purchasing decision: quantity or quality? Most U.S. farmers would agree the primary focus is yield — the characteristic that generates profit at the elevator. In a time of tightening margins, it makes complete sense. The end user, however, will never know or care if a farmer produces 30-or-100 bushel beans.

Improved soybean meal protein content and composition leads to higher demand from the consumers of U.S. and Iowa soy. International poultry, swine and aquaculture markets rely on the high levels of protein, optimum amino acid balance and digestible energy to create high-quality feed. “This is about enhancing competitiveness,” says Grant Kimberley, ISA director of market development. “Improving the overall quality of our soybeans will make us more competitive on a global scale.” The price of soybeans is driven by estimated processed value (EPV), the combined value of soybean meal, oil and hulls. When farmers raise EPV they also raise a crop’s value per acre.

According to soy-checkoff research, if Iowa soybean farmers raise protein levels by just one percent they could earn up to $12.33 more per acre. As the collective farming community raises EPV on a regional and national scale — the impact is positive across the board. One way U.S. soybean farmers can help meet the needs of market demand is by planting varieties that deliver both high protein and high yield. Farmers are encouraged to focus on quality in conjunction with yield and fit for farm as plans for the 2015 growing season are developed. Learn more about soybean quality and utilize free tools, visit www.beyondtheelevator.com.

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NUMBER TW O BECOMES By Allison Arp

Hog manure has become a coveted asset for Iowa’s grain farmers. Manure as a fertilizer isn’t a new idea, but managing how it’s used is improving. What was once considered waste is now being used as a tool to make farmers more energy efficient and increase yields. In 2009, the Strategies Targeting American Agricultural Resources and Sustainability (STAARS) program began to measure the energy usage of practices involved in corn production. According to the STAARS Iowa Aggregate Report, farmers using manure to provide nutrients apply less chemical fertilizer and are more energy efficient. “Managed correctly, manure can be a very efficient and sustainable fertilizer option,” says Heath Ellison,

Iowa Soybean Association (ISA) Environmental Programs and Services agriculture and natural resources manager. “For corn production, the major energy input is the production and application of nitrogen fertilizer. When comparing energy input values for manure with those of commercial fertilizer, manure has an edge in energy efficiency and, in many instances, an edge in yield as well.” The STAARS program involved analyzing data from over 500 farms across 6 states. Data collected in 2011 from 170 Iowa corn fields show greater yield and less energy needed per bushel when using manure compared to commercial fertilizer. The report also stresses that management is especially important when using manure. This

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is because manure is often applied at higher rates than commercial fertilizer because of uncertainty regarding N availability. “Using manure instead of buying commercial fertilizer utilizes our hog operation to put nutrients back in the soil,” says Grand Junction farmer Bruce Wessling. “We get yield benefits using swine manure instead of commercial fertilizer.” For Wessling’s operation, the manure management plan is updated annually and he encourages other farmers to do the same. The Wesslings’ plan includes taking samples from their manure pits every year and then adjusting the application rate to reflect the manure nitrogen content. The Wessling family has also conducted

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NUMBER O NE trials with the ISA On-Farm Network® to find out what works best on their operation. “We have done trials to see if we need to add to our manure plan,” Wessling says. “For the most part we’re getting everything we need out of the manure on a corn-bean rotation.” Even though manure is all Wessling needs for his operation, he encourages other farmers to conduct their own research. He says each manure pit tests differently so farmers need to know what they’re applying to their fields and which application practices work best for them. Some farmers find applying additional nutrients

to supplement the manure optimizes corn crop yields. Part of finding out what works on their farms is testing options. Since 2007 the OnFarm Network has conducted more than 120 trials evaluating manure management across the state. The majority of manure trials have compared manure vs. manure with varying rates of additional nitrogen to better understand manure efficiency and availability. Other trials included testing manure additives and stabilizers, various manure forms and application rates and timing to further enhance the management plans of farmers.

“

Using manure instead of buying commercial fertilizer utilizes our hog operation to put nutrients back in the soil.

”

— BRUCE WESSLING, Grand Junction

MEASURING ENERGY IN MANURE By Heath Ellison

In order to calculate the energy saved by farmers applying manure as a fertilizer, manure must be appointed with an energy value. However, assigning an energy value to manure is a challenge. How much of the energy used to raise livestock (feeding, watering, transportation, lighting, ventilation, medication, etc.) should be attributed to the meat, egg or dairy products and how much to the manure byproduct? And how much does this energy cost vary from operation to operation and between types of livestock? Research into this topic for the STAARS project did not yield an adequate answer for these questions and generated a fair amount of debate. Energy costs associated with fertilizer fall into two categories: direct and indirect. Direct energy (as defined for the STAARS program), is the energy used in transportation of the fertilizer to the field and application within the field. This is almost always a straightforward measurement of fuel-use in a truck, tractor or applicator. Direct energy values for manure and commercial fertilizer generally vary more depending on application method than fertilizer type. Indirect energy (or embedded energy) is the energy that went into creating the fertilizer product. This includes everything from obtaining the original nutrient source through drilling or mining, to refining and processing, to shipping the final product. Indirect energy accounts for the life cycle of the fertilizer. In STAARS, due to a lack of published research data, the indirect energy value of manure is assumed to be zero. This results in an inflated efficiency advantage to manure as compared to commercial fertilizer. However, given the majority of energy used to raise livestock should be attributed to the food product, it is generally accepted manure as a nutrient source is a more energy efficient option than commercial fertilizer.

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