How Brazil and the US Dominate the Global Soybean Market

Soybeans are one of the most important crops in the world, with a total production of 353 million metric tons in 2020. They are used for various purposes, such as animal feed, vegetable oil, biodiesel, tofu, soy milk, and soy sauce. Soybeans are also rich in protein, fiber, and essential nutrients, making them a valuable food source for humans and animals alike.

The global soybean market is dominated by two countries: Brazil and the United States. Together, they accounted for 66% of the world’s soybean production and 77% of the world’s soybean exports in 2020. In this article, we will explore how these two countries became the leading producers and exporters of soybeans, and what are the main factors that influence their competitiveness in the global market.

The Rise of Brazil as a Soybean Powerhouse

Brazil is the largest producer and exporter of soybeans in the world, with a production of 121.8 million metric tons and an export value of $39 billion in 2020. Brazil’s soybean production has increased dramatically in the past decades, from 16.6 million metric tons in 1990 to 121.8 million metric tons in 2020, an increase of 634%. Brazil’s soybean exports have also grown exponentially, from 6.4 million metric tons in 1990 to 96.3 million metric tons in 2020, an increase of 1405%.

Brazil’s success in the soybean sector can be attributed to several factors, such as:

1. The expansion of arable land

The expansion of arable land, especially in the Cerrado region, which is a vast savanna-like area that covers about 20% of Brazil’s territory. The Cerrado has been transformed into a major agricultural frontier, thanks to the adoption of new technologies, such as improved seeds, fertilizers, pesticides, irrigation, and mechanization. The Cerrado accounts for about 60% of Brazil’s soybean production.

2. The improvement of infrastructure and logistics

The improvement of infrastructure and logistics, such as roads, railways, ports, and storage facilities, which have reduced the transportation costs and increased the efficiency of moving soybeans from the farms to the markets. Brazil has invested heavily in building new roads and railways that connect the main soybean-producing regions to the ports, especially in the northern and northeastern parts of the country. Brazil has also expanded its port capacity and modernized its terminals to handle larger volumes of soybean exports.

3. The diversification of export markets and trade agreements

The diversification of export markets and trade agreements, which have increased Brazil’s access to foreign demand and reduced its dependence on a single buyer. Brazil has diversified its soybean export destinations, from mainly Europe and Japan in the 1990s to China and other Asian countries in the 2000s and 2010s. China is now Brazil’s largest soybean export market, accounting for 59% of its total exports in 2020. Brazil has also signed several trade agreements with other countries and regions, such as Mercosur, the European Union, India, Egypt, Israel, Morocco, and South Korea, which have lowered or eliminated tariffs and non-tariff barriers for its soybean exports.

The Role of the United States as a Soybean Leader

The United States is the second-largest producer and exporter of soybeans in the world, with a production of 112.5 million metric tons and an export value of $27.8 billion in 2020. The United States has been a pioneer and a leader in the soybean sector since the early 20th century when it started to cultivate soybeans as a rotation crop to improve soil fertility and prevent erosion. The United States has also been at the forefront of developing new varieties and technologies that have improved the yield and quality of soybeans.

The United States’ competitive advantage in the soybean sector stems from several factors, such as:

1. The availability of abundant and fertile land

The availability of abundant and fertile land, especially in the Midwest region, which is known as the Corn Belt or Soybean Belt. The Midwest accounts for about 80% of the United States’ soybean production. The United States has about 33 million hectares of land planted with soybeans, which is more than twice as much as Brazil’s 18 million hectares.

The high level of productivity and efficiency,

The high level of productivity and efficiency, which results from the use of advanced technologies, such as biotechnology, precision agriculture, irrigation systems,
and digital tools. The United States has one of the highest yields per hectare in the world for soybeans: about 3.2 metric tons per hectare in 2020 compared to Brazil’s 2.9 metric tons per hectare.

3. The strong research and innovation capacity

The strong research and innovation capacity, which is supported by public and private institutions that invest heavily in developing new varieties, practices, and solutions for the soybean sector. The United States has a well-established network of universities, research centers, extension services, and industry associations that collaborate to generate and disseminate knowledge and technology for soybean farmers and processors. The United States is also a leader in biotechnology, having developed and commercialized the first genetically modified soybeans in 1996, which are resistant to herbicides and insects.

4. The diversified and value-added processing industry

The diversified and value-added processing industry, which adds value to the raw soybeans by transforming them into various products, such as soybean oil, soybean meal, soy protein, soy milk, tofu, and biodiesel. The United States has a large and sophisticated processing industry that consumes about 50% of its domestic soybean production and exports the rest. The United States is the largest exporter of soybean oil and soybean meal in the world, with a market share of 25% and 19%, respectively, in 2020.

The Future Outlook of the Global Soybean Market

The global soybean market is expected to continue to grow in the future, driven by the increasing demand for animal feed, vegetable oil, and protein-rich foods in developing countries, especially in Asia. According to the USDA’s projections, the global soybean production will reach 405 million metric tons by 2030, an increase of 15% from 2020. The global soybean exports will reach 191 million metric tons by 2030, an increase of 23% from 2020.

Brazil and the United States will remain the dominant players in the global soybean market, accounting for 69% of the world’s production and 82% of the world’s exports by 2030. However, they will also face some challenges and opportunities, such as:

The environmental and social impacts of soybean expansion

The environmental and social impacts of soybean expansion, which may affect the sustainability and reputation of their production systems. Both countries will have to balance the economic benefits of increasing their soybean output with the environmental costs of deforestation, land degradation, water pollution, greenhouse gas emissions, biodiversity loss, and social conflicts. Both countries will also have to comply with the environmental and social standards and certifications required by some of their export markets and consumers.

The trade tensions and uncertainties with China

The trade tensions and uncertainties with China, which may affect their export performance and competitiveness. Both countries have experienced trade disputes with China in recent years over various issues, such as tariffs, subsidies, intellectual property rights, human rights, and geopolitics. These disputes have resulted in fluctuations and disruptions in their soybean exports to China, which is their largest and most important market. Both countries will have to diversify their export markets and strengthen their trade relations with other countries to reduce their dependence on China.

The technological innovations and disruptions

The technological innovations and disruptions that may change the dynamics and structure of the soybean sector. Both countries will have to embrace and adopt new technologies that can improve their productivity, efficiency, quality, and resilience of their soybean production systems. These technologies may include biotechnology, digital agriculture, artificial intelligence, blockchain, and alternative proteins. Both countries will also have to anticipate and adapt to the potential disruptions that these technologies may cause in their processing and consumption patterns.

Soybean Exports by Country: Trends and Prospects

Soybeans are one of the most traded agricultural commodities in the world, with a global production of 353.5 million metric tons in 2020 . The main producers of soybeans are Brazil, the United States, Argentina, China and India, which together account for 87% of the world output . Soybeans are mainly used for animal feed, vegetable oil, biodiesel and human consumption.

The demand for soybeans has been growing steadily in the past decade, driven by the increasing population, income and meat consumption in developing countries, especially China. China is the largest importer of soybeans in the world, accounting for 49% of the global imports in 2021 . Other major importers include Mexico, Argentina, Spain and Egypt .

According to the USDA Foreign Agricultural Service, the U.S. soybean exports are expected to reach 57 million metric tons in 2022, with a total value of $34.4 billion . This represents an increase of 7% in volume and 10% in value compared to 2021 . The main destinations for U.S. soybean exports in 2022 are China (19.3 million metric tons), Mexico (3.6 million metric tons), Egypt (2.7 million metric tons), Germany (1.8 million metric tons) and Japan (1.7 million metric tons) .

The outlook for U.S. soybean exports is positive, as the global demand for soybeans is projected to continue to grow in the medium term, especially in Asia and Africa. The U.S. has a competitive advantage in terms of quality, reliability and sustainability of its soybean production and supply chain. However, there are also some challenges and uncertainties that may affect the U.S. soybean exports, such as trade policies, exchange rates, weather conditions, environmental regulations and competition from other suppliers.

References:

http://www.fao.org/faostat/en/#data/QC/

https://www.atlasbig.com/en-ie/countries-by-soybean-production

https://en.wikipedia.org/wiki/List_of_countries_by_soybean_production
https://oec.world/en/profile/hs/soybeans
https://www.fas.usda.gov/data/commodities/soybeans
https://www.ers.usda.gov/topics/crops/soybeans-and-oil-crops/related-data-statistics/
https://www.statista.com/statistics/192081/us-soybean-exports-by-major-countries-of-destination/

https://en.wikipedia.org/wiki/List_of_countries_by_soybean_production

https://www.fas.usda.gov/data/commodities/soybeans

https://oec.world/en/profile/hs/soybeans