SIC 0116

Companies in this industry

Industry report:

This industry consists of establishments primarily engaged in the production of soybeans.

Industry Snapshot

Soybeans are the second largest cultivated crop in the United States, behind corn, with more than 78 million acres planted in 2010. This supports the United States' position as the world's largest exporter and provider of both vegetable oil and protein-based feed. In 2009, the United States produced more soybeans than any other country, for a total value of $31.8 billion, up from the 2008 total of $27.0 billion and the 2005 total of $17.3 billion. More than 80 percent of the crops are in the Midwest, with the highest 2009 production totals in Iowa (486 million bushels), Illinois (430 million bushels), Minnesota (285 million bushels), Indiana (267 million bushels), and Nebraska (259 million bushels).

Soybeans, which have high quantities of protein, and soybean products are used in a wide range of food and industrial products. The three major soy products are soy oil products, whole bean products, and soy protein products. Food products include baby food, cereal, diet foods, imitation meats, processed meats, soy sauce, tofu and miso, salad dressings, margarine, cooking oil, candy, and baked goods. Soybeans are used in pet foods and are the leading source of protein meal for U.S. livestock. Industrial uses for soybeans include wallboard and plywood, medicines, soaps and disinfectants, pesticides, fertilizers, candles, linoleum, varnish, fire extinguisher fluid, and paint. Crops are typically planted in May and early June with harvests in late September and October.

Although industry giants such as DuPont subsidiary Pioneer Hi-Bred International Inc. of Johnston, Iowa, and agrochemical giant Monsanto Company of St. Louis, Missouri, have traditionally been leaders in the industry, most soybeans continue to be grown on individual or family-operated farms. The 2007 Census of Agriculture, updated every five years by the U.S. Census Bureau, reported an estimated 285,089 soybean farms, down from 317,611 in 2002.

Organization and Structure

Federal policies have affected the output and price of U.S. soybeans. The government has supported soybean prices by setting the bottom price for soybeans and other competing crops. Under the U.S. Department of Agriculture's (USDA) Commodity Credit Corporation, farmers could borrow money against their crops when they harvested them, with the harvest serving as collateral, and could sell their harvest at any time. At the end of nine months, the farmer had to repay the loan or forfeit the harvest to the government. This program allowed farmers to sell when prices were high and thus more easily pay back the loan. It also guaranteed them a minimum price set by the USDA, even if market prices dipped below the loan rate. For the most part, soybean prices have been at or above the government loan rate since 1950.

There are no restrictions or production quotas for soybeans, although the production of other commodities such as wheat, feed grains, cotton, and rice has often cut down on the number of acres available for soybean cultivation. However, reduction of potential soybean acreage reduced supply and maintained higher soybean prices. As part of the 2002 legislation, soybean farmers were able to receive direct and countercyclical payments if they joined the program when it was first implemented and included oil crop plantings in their base acreage.

Although soybean producers have viewed agricultural bills such as the 1990 five-year act that preserved price controls for soybeans and other crops with consternation, they were pleased with the Federal Agriculture Improvement and Reform Act of 1996 (FAIR), which alleviated the fears generated by the preceding agricultural legislation. The American Soybean Association (ASA) welcomed the 1996 bill with its more equitable rate of marketing loans that allowed soybean growers funds similar to what major cash-grain growers were eligible to receive. Indeed, soybean production was expected to benefit dramatically from the FAIR legislation because of high domestic and international soybean demand.

The Farm Security and Rural Investment Act of 2002, also known as the 2002 Farm Act, provided increased levels of support for U.S. farmers, reducing the intent of past legislation that made farmers more dependent upon the market rather than relying on government support. For soybean farmers, the bill provided benefits in numerous areas. In addition to marketing loans and other forms of financial support, the bill increased funding for conservation and bio-energy programs and provided additional support on the trade front by strengthening funds for initiatives like the Food for Progress program. In 2007, as the 2002 Farm Act was due to expire, legislation was proposed by the USDA that included a variety of alterations such as implementing a revenue-based program instead of the price-based countercyclical program, updating the program's commodity marketing assistance loans, and putting a cap on subsidy payments for individuals at $360,000. It also amended conservation programs and increased support for renewable energy. In May 2008, Congress overrode President Bush's veto of the bill, and the Food, Conservation, and Energy Act of 2008, more commonly known as the New Farm Bill, was passed into law. Cost of the bill was estimated at $289 billion.

Background and Development

Soybeans, which are legumes related to clover and peas, were cultivated in Eastern Asia 5,000 years ago. They were not grown in the United States until the beginning of the nineteenth century, when they were grown experimentally for use as livestock feed. When soybeans were processed into oil and meal, the primary use was for fertilizers. Their use as fodder also grew, but World War II created an increased demand for soybeans for human and animal consumption, causing their industrial applications to expand as well. Because soybeans were an inexpensive protein source, their use has been credited with aiding the expansion of the poultry industry in the 1970s and 1980s.

U.S. producers' attempts to sell a mixture of regular and genetically engineered soybeans to the European market in 1996 caused controversy and drops in exports. Though U.S. policy did not require labeling of genetically engineered products, European customers demanded only soybeans that were not tampered with genetically. This controversy cost U.S. producers $150 million, which was almost 10 percent of their European exports.

The increasing success of soybeans began in the 1994-95 season, when soybean oil consumption, for example, increased to 13 billion pounds. Moreover, soybean yields continued to increase. In 1994, the soybean industry recorded a yield of 41.4 bushels per acre, up substantially from 1993's 32.6 bushels-per-acre yield, with total soybean yield at a record 2.5 billion bushels. Since 1994, soybean yields have consistently been high as a result of the FAIR Act's provision to allow farmers the flexibility to plant more acres of soybeans. This trend continued through the late 1990s. For example, according to the American Soybean Association (ASA), soybeans were planted on a record 72.4 million acres in 1998, producing a record soybean crop. However, prices paid to farmers per bushel were the lowest average since 1985, making the 1998 crop value of $13.9 billion lower than previous years.

In the early years of the first decade of the 2000s, soybean yields continued to increase and prices continued to fall. ASA data revealed that in 2001, soybeans were planted on 74.1 million acres, producing a record crop of approximately 2.9 billion bushels. However, average prices paid to farmers fell sharply, dropping 42 percent from 1996 levels and lower than 1972's average price. Consistent with past trends, at $12.3 billion, the 2001 crop value was much lower than in prior years. For the 2002-03 season, 74 million acres were planted with a yield of 38 bushels per acre and priced at $5.53 per bushel. The following season, due to aphids and drought conditions, 73.4 million acres were planted. This acreage yielded only 33.9 bushels per acre, a supply that was reflected in a price jump to $7.34 per bushel.

Acres planted with soybeans, which had remained relatively stable, experienced some variance from 2005's 72.1 million acres to 75.5 million acres in 2006. That year's yield of 42.7 bushels per acre was down slightly from 2005 (43 bushels per acre) and was priced between $6.10 and $6.50 per bushel as compared to $5.50 per bushel in 2005.

Soybeans are grown in more than 30 states, making them the second largest crop in cash sales in the United States and the largest value crop export. Soybeans are the second largest source of vegetable oil (70% of the fats and oils consumed in the United States come from the soybean) and the largest source of protein feed in the world. In 2008, U.S. farmers produced almost 3 billion bushels, or about 80.5 million metric tons, of soybeans. Average price in 2008 was $9.65 a bushel, down somewhat from $10.10 in 2007 but significantly more than the $6.43 per bushel experienced in 2006. Yield continued on a downward trend, dropping from 41.7 bushels per acre in 2007 to 39.6 bushels per acre in 2008, after reaching a five-year high of 43.1 bushels per acre in 2005.

On the technology front, genetically engineered (GE) crops had been introduced in 1996, and U.S. farmers increasingly made use of these high-tech options throughout the first decade of the twenty-first century. GE crops are categorized as herbicide-resistant and insect-resistant. Herbicide-resistant soybeans and cotton were the two most widely and rapidly adopted GE crops in the United States, followed by insect-resistant corn. In 2000, 54 percent of all soybeans planted in the United States were genetically engineered; by 2008, that figure had reached 92 percent. The majority of these were Roundup Ready soybeans, produced by industry leader Monsato Co. Scientists continued to work on improving and perfecting GE crops, although they were met with some resistance from environmental and consumer groups.

In April 2009, the soybean industry was influenced by an outbreak of the swine flu in Mexico that later spread to the United States. Experts predicted a drop in the demand for pork as a result of the epidemic, which would ultimately result in a reduced number of hogs and a decreased demand for feed. 98 percent of the soybeans produced in the United States goes to livestock feed. Despite the dire predictions, the first seven months of 2009 saw only a 9.6 percent decrease in the amount of soybeans crushed (or prepared for use) as compared to a year earlier. Darrel Good, a University of Illinois Extension marketing specialist, told The Corn and Soybean Digest, "Soybean exports and export sales remain robust as Chinese buying remains strong in the face of a smaller South American crop, particularly in Argentina." Good predicted that exports would reach or even exceed the USDA projections for the rest of the year.

Current Conditions

In 2009, U.S. soybean farmers planted 77.5 million acres and harvested 3.36 billion bushels of soybeans, which were valued in excess of $31.7 billion. The average price of soybeans during the 2009-10 marketing season was $9.45 per bushel. Of the 3.36 billion bushels harvested, the United States exported 1.28 billion bushels (valued at $21 billion), which totaled 46 percent of the world's soybean trade. China was the largest importer of U.S. soybeans ($9.2 billion in value), followed by Mexico ($1.3 billion), Japan ($1.1 billion), and the European Union ($770 million).

Bushels per acre continued to increase throughout the first decade of the 2000s, reaching 44.0 bushels per acre in 2009, up from 41.7 bushels per acre in 2008. Longer trend lines reveal the dramatic increases in productivity per acre over the course of several decades. In 1984, yields stood at 28.1 bushels per acre; in 1989, at 32.3 bushels per acre; in 1999, at 36.6 bushels per acre. In 2004, the industry reached over 40 bushels per acre, achieving 42.2 bushels per acre.

After the sharp price spikes in 2007 and 2008, soybean prices stabilized somewhat in 2009, declining to an average of $9.45 per bushel. However, due to increased yields, the overall value of soybean production rose in 2009. In fact, overall, soybean production values trended sharply upward during the first decade of the twenty-first century, climbing from just $12.29 billion in 1999 to $31.76 billion in 2009.

In the latter part of the first decade of the 2000s, soybeans joined corn as a part of the biofuels industry. In fact, between 1999 and 2009, U.S. consumption of biofuels increased from just 500,000 gallons to over 2.06 million gallons. One bushel of soybeans can produce 1.5 gallons of biofuel.

Despite the record yield levels for 2009 and projected high yields for 2010, consumption continued to grow for soybeans both domestically and as export trade. LeAnn Ormsby reported in the Southwest Farm Press in June 2010, " Consumption of U.S. soybeans during the current marketing year is expected to reach a record 3.328 billion bushels, 247 million more than the previous record of 2006-07. The 281 million bushel year-over-year increase reflects a 172 million bushel increase in exports and a 72 million bushel increase in the domestic crush."

America and the World

As the world's leading exporter of soybeans heading into the early 2010s, the United States had exported 1.28 billion bushels, equal to 34.9 million metric tons, in 2009. Total value of soybeans exported from the United States exceeded $21 billion. Soybeans accounted for 78 percent of exported product ($16.45 billion), followed by soybean meal (17 percent, $3.5 billion) and soybean oil (5 percent, $1.05 billion). China was the largest customer of U.S. soybean exports, with purchases of more than $9.3 billion, followed by Mexico ($2.0 billion), Japan ($1.1 billion), and the European Union ($770 million).

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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