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IP soybeans looking stronger in 2009

Backed by attractive premiums, growers of Identity Preserved (IP) soybeans in Canada have good reason to look forward to a stronger market in 2009. In general, premiums are up by approximately $1.00 per bushel from 2008. The combination of lower prices in Chicago and premiums in the range of $2.50 to $3.00, or more, is definitely getting the growers’ attention.


April 20, 2009
By Blair Andrews
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Advances in biotech in other crops, specifically stacked traits in corn, are making it easier to continue growing corn, and may be taking some of the focus off IP soybeans.


 

Backed by attractive premiums, growers of Identity Preserved (IP) soybeans in Canada have good reason to look forward to a stronger market in 2009. In general, premiums are up by approximately $1.00 per bushel from 2008. The combination of lower prices in Chicago and premiums in the range of $2.50 to $3.00, or more, is definitely getting the growers’ attention. “There’s certainly interest in the countryside when there’s the possibility of better returns. Whether it’s through pricing at the Chicago Board of Trade or premiums associated with IP contracts, growers are seeking out those opportunities,” says Jim Gowland, chair of the Canadian Soybean Council. Gowland, who farms near Holyrood, Ontario, says the increased interest is all about “returns to management,” referring to the need for producers to receive payments for the extra effort and the risks involved with growing the food-grade soybeans.

In addition to tighter supplies, several factors are driving the stronger market. While the costs and inconvenience of growing IP, as compared with genetically modified (GM), may have been detrimental in the past, the expense of growing GM soybeans is rising too. “The price of Roundup Ready seeds increased dramatically, up about 20 percent, and the price of Roundup is up 15 percent from last year,” says Frank Backx, grain merchandiser at Hensall District Co-operative. Backx is expecting an increase in IP soybean acres, noting that for the first time in many years, several large acreage producers in parts of Southwestern Ontario are planning to plant IP varieties this spring.

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As for demand, Japan’s appetite for IP soybeans remains solid despite the economic turmoil and rising food prices. Marc Ham is director of export for Quebec-based Semences Prograin Inc., the largest private developer and producer of value-added soybeans in Canada. Ham says his Japanese distributors are following the lead of Japanese consumers. “The consumer is still set on eating tofu and other soybean derivatives from non-GM production. The demand is definitely there,” says Ham. The non-GM demand also remains strong in Malaysia, Singapore and parts of Indonesia, and Ham notes that increased interest is being shown in the Middle East and India.

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In spite of the economic downturn, demand among Japanese consumers is likely to keep IP soybean premiums relatively high.  
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Promoting the Canadian advantage in IP soybeans has an
increased importance to for Jim Gowland, pictured here (left) with prospective buyers from Vietnam.


 

Marty Huzevka, food grade soybean marketing manager at Hensall District Cooperative concurs. “They (Japan) have been willing to accept that fact that they have to pay more for their beans. When you get some of the top-yielding varieties paying $2.50 or better; that’s pretty significant,” he says. Huzevka adds that he believes the high prices in Chicago inflicted greater economic damage last summer because many customers had to pay values for soybeans that were not within their operating budgets.

 Protein from soybean in a class by itself
While higher priced protein markets like the meat sectors nervously try to weather the economic storm, demand could actually increase for soybean foods. Brad Chandler, food grade soybean manager at Thompsons Limited, recently paid a visit to Japan. Similar to Canada’s story, Chandler says Japan’s automotive sector is hurting and other export business is being affected by the high value of the yen. “What we find is that when we’re over there, as people lose jobs or are not as confident about their economy, they go back to eating in more. And when they eat in more, they usually prepare more traditional food,” explains Chandler. “When they eat out, they eat western-style foods. But at home miso, tofu and natto are their comfort foods.”

And the stage is set for Canada to supply more of those foods. Food scares in China and the huge shift in the US to GM crops give Canada a leg up on their major export competitors. With some estimates of GM acreage in the US at 96 to 97 percent, Canada is viewed in Japan as a high-quality supplier of non-GM soybeans. “As a Canadian industry, we have such a good image to the customers,” says Dwight Gerling, managing director of DG Global Inc. The Toronto-based company exports food-grade soybeans to 25 countries around the world. “We always send good quality non-GM beans. We can segregate it, and export customers have the perception that if it’s Canadian, it has to be better.”

While optimistic for 2009, those in the Canadian IP soybean industry are tempering their enthusiasm with caution because several factors are challenging the sustainability of the market in the future. There is always the potential for the buyers to push back and reduce their demand when the values reach a certain price point. In fact, Gerling says some countries in Southeast Asia are not showing the same willingness as Japan to pay the higher premiums. He notes that some were switching to GM beans before the market meltdown in the fall. “I’ll ship to cost conscious countries like the Philippines and Vietnam. So when non-GM premiums were getting pretty high, they don’t want to, or can’t pay them, so they’re reluctantly using GMOs.”

More players entering the game
Increased competition is another factor to watch as the high premiums are attracting interest in other countries. Chandler says the American Soybean Association is using government support to heavily promote IP soybean production to US growers. He also predicts South America and Eastern Europe will be bigger players too. “I can see investment coming in to develop IP non-GM varieties in Ukraine and Russia. Everything is fitting. That’s probably a threat. As premiums stay higher, other origins are coming on,” notes Chandler.

In addition to facing rivals from other countries, Chandler says IP production in Canada will have to compete with new crop choices at home. “Biotechnology in other crops is probably one of our biggest threats right now. Stacked traits in corn are making it easier to manage the crop. The corn stands better and dries down better. It’s allowing other crops to be a bigger competitor.”

As for the future of IP soybean production, Chandler and others say that maintaining Canada’s image and advantage will be key. “We need our growers to grow these beans and make money. That’s what we stress to these markets. They have to see our quality and our food traceability because the biggest thing in the Japanese market is their comfort with
Canadian food. Part of the Asian market is more price-driven, but the Japanese market is more about food safety.”

Echoing Chandler’s comments, Gerling warns that it will be difficult for Canada to regain its position if too many growers lose interest in the IP market. “As soon as growers become unwilling to sign these contracted acres or try to maintain this market, it is going to be lost. Once customers begin searching for alternative sources, they may find some that aren’t that bad by comparison and start switching,” adds Gerling.

Thus, to keep those at home and abroad interested, promoting the Canadian advantage takes on increased importance for Jim Gowland and the Canadian Soybean Council. He points out the industry constantly has to “prove itself.” As an example, he explains the Japanese compare everything to their domestic production. Fortunately, Gowland says, it is a comparison that bodes well for the Canadian soybean producing areas of Ontario, Quebec and Manitoba. “The domestic production in the Hokkaido province is very similar to that in Canada. The varieties that we are able to grow match the same specifics that they have become accustomed to,” says Gowland, who credits teamwork across the industry for helping to build Canada’s strong position. “It’s the whole aspect of the industry approach, the growers, the researchers, the processors and the food science people, to go over there with an industry commitment that we have all the players on the same team that assure the customers they get what they want.”


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