Pulse Beat

The Challenge and Promise of Soybeans in Canada – A Definitive Guide

Toban Dyck, Director of Communications, MPSG

There’s uncertainty in the marketplace. The commodities market seems feral, wild, unpredictable. China has completely stopped importing Canadian canola and has virtually done the same with our soybeans. The Canadian farmer was once the casualty of a U.S.-China trade war, but that has changed. We’re involved in our own battles now.

I sat down with Soy Canada’s Executive Director, Ron Davidson for insight into our soybean industry, its markets and its future. Davidson’s responses are packed with incredible and new information that shows the longevity of the legume as an unparalleled source of protein, as well as source of pride for Canadian farmers.

The following also underpins the importance of groups such as Soy Canada in ensuring our farmers are intelligently positioned in the global marketplace. Enjoy!

– There’s uncertainty in the global marketplace. Where do you see this heading and how long until it settles?

A – Canada is at present in a particularly challenging time as the United States-China trade dispute severely disrupted normal trade patterns in 2018. In the Spring of 2018 when China implemented a 25 percent retaliatory tariff on U.S. soybeans, Canadian prices, which are based off future prices on the Chicago Board of Trade, fell significantly. As the summer rolled out, U.S. exports to China virtually ceased, opening up greater Canadian export potential to that country.

Canadian exporters experienced strong demand in China, but at the same time the United States aggressively competed with low prices for market share in Canada and the 70 other export destinations. Hence, while Canada’s soybean exports to China increased by 82% in 2018 to 3.6 million metric tonnes, exports to the European Union fell by 45% or 575,553 tonnes. Canada’s increased dependence on exports to China created a vulnerability that became tangible at the beginning of March when China suspended the canola licenses of two Canadian companies.

Exports of Canadian soybeans to China slowed dramatically to a trickle since the beginning of 2019. It would appear that three factors have contributed to the change: first, unprecedented Canadian exports to China during the September to December, 2018 period (3.2 million tonnes in 2018, compared to 1.4 million tonnes in 2017, and 1.3 million tonnes in 2016); second, availability of a large 2019 soybean harvest in South America; and, third, uncertainty by Chinese importers pertaining to future market access conditions in China.

The positive aspect of the current situation is that China had imported 44% of Canada’s entire 2018 harvest by the end of 2018. Neither Soy Canada nor the Canadian government is aware of a formal decision by China to impede or prevent the importation of Canadian soybeans or soy products. Conversely, it will be necessary for Canadian exporters to reclaim some of the market share elsewhere that was ceded to American soybeans in 2018.

 

– How much does Canada’s soybean market depend on China—how much do we export to them—what kinds of soybeans do they want?

A – China was the single largest export market for Canadian soybeans in each of calendar years 2015 (1.2 million tonnes, $589 million), 2016 (1.8 million tonnes, $948 million), 2017 (2.0 million tonnes, $998 million) and 2018 (3.6 million tonnes, $1.7 billion).

By value, China accounted for 36% of Canadian exports in 2017 and 54% of Canadian exports in 2018. By volume, China accounted for 39% of Canadian exports in 2017 and 59% of Canadian exports in 2018.

On average, in 2017 and 2018, 80% of exports to China were identified as soybeans for crushing (i.e., into soy oil and soy meal) and 20% were identified as being for other purposes (e.g., soy milk, tofu, tempeh, miso and edamame-type products).

Canadian export statistics do not differentiate between GM and non-GM soybeans. However, it is believed that the GM to non-GM ratio is approximately the same as the ratio of soybeans for crushing (80%) to soybeans for other uses (20%).

 

– How are new markets for soybeans created? And what new markets could be available?

A – The world is already very familiar with soybeans as a source of high-quality protein and vegetable oil for both human and livestock consumption. Although Canada currently exports soybeans and soy products to some 70 countries around the globe, more than 80% is shipped to only four destinations: China, European Union, United States and Japan.

Increasing soybean production in Canada during the coming years will require an equivalent expansion in export volumes. Canada cannot match the intensity of technical and trade development missions undertaken by certain competitor countries.

Nevertheless, foreign importers are requesting that this country be present more frequently in their countries than has been the case in the past. Although successive Canadian market development and liaison missions over many years have developed and supported a strong reputation for this country’s identity-preserved/non-GM soybeans, there remains a need for enhanced development and promotion of the Canadian perspective with respect to the availability and quality of Canadian crushing/GM soybeans.

Soybean meal has long been used in livestock rations, particularly in the pork and poultry sectors. A more recent occurrence has been the expanding promotion and use of soy as a food source in the aquaculture sector. Aquaculture will become an increasingly substantial market for soybeans as the sector continues its expansion and increases its familiarity with the use of soy as a high- quality fish food.

Although not yet produced commercially in Canada, the production of high-oleic soybeans is expanding in the U.S. High-oleic varieties have been grown successfully in Ontario, but commercially viable production has been impaired to date by the absence of both a local crushing facility and assured food sector demand. Should food sector demand for high-oleic soybean oil extend into Canada, the initiative to secure processing in Canada would be renewed.

Sustained consumer demand for more environmentally-friendly products is acting as a catalyst for the use of vegetable oils to replace petroleum in motor oils and lubricants. As these products become better known, commercial and consumer demand for “green” products could drive growth in the use of soy oil.

Vegetable oils are already being used in the production of Canadian biofuels. Oilseed demand could increase significantly should the current campaign to increase the percentage of fuel that is produced from renewable sources be successful.

Soy is unique among major field crops in that, similar to meat, soybeans offer all of the essential amino acids required by humans. Taking into account the protein content and quality of soybeans, Health Canada, the Canadian Paediatric Society, Dietitians of Canada, and the Breastfeeding Committee for Canada have jointly stated: “For the older infant and young child who is no longer breastfed and is not being introduced to cow milk, soy-based commercial infant formula is recommended until two years of age” and “Other plant-based beverages, such as almond, rice, and coconut ‘milks’, are not nutritionally comparable to homogenized (3.25% M.F.) cow milk. They have a very different macronutrient composition, and are not suitable milk alternatives.”

Nearly two-thirds of the soybeans grown in Canada are destined for export markets, either as raw soybeans or processed for end use. Soy Canada works diligently on behalf of the entire soy value chain to maintain and enhance existing markets and develop and expand into new markets throughout the world. Soy Canada participates in Government of Canada trade missions as well as leading market development missions that include producers, exporters and subject specialists.

 

– How important are relationships in the global marketplace? Are face-to-face meetings valuable? What do they accomplish?

A – It is important that exporters create and maintain relationships with foreign buyers. Although cultural expectations do vary by country, enduring business transactions are built upon personal relationships.

At the highest level, the federal government works to establish a positive trading environment via free-trade agreements with key trading partners and to promote Canadian exports through dedicated staff at Embassies and Consulates worldwide.

Soy Canada participates in multi-commodity ministerial trade missions and organizes sectoral market development missions consisting of: seminars and presentations to importers and end-use stakeholders; business-to-business meetings; industry association meetings; and, networking receptions. Through these activities, Soy Canada showcases the quality of Canada soybeans and soy products and facilitates business relationships between Canadian exporters and foreign buyers and end users.

 

– What is Soy Canada’s view on the market for non-GM soybeans? Explain.

A – Soy Canada supports the production, processing and export of GM, non-GM/identity-preserved and organic soybeans and soy products. The GM/non-GM ratio of the Canadian soybean crop fluctuates according to the amount of the premium that is offered to producers for non-GM soybeans.

The production of non-GM soybeans continues to be strong in eastern Canada and is in the early phase of introduction into western Canada. As the seeded area of GM soybeans has been expanding more quickly than that of non-GM, the percentage of the Canadian crop that is non-GM has been decreasing. It is estimated that about 25% of Canadian production is non-GM.

Canada is a global leader in producing non-GM soybeans for world markets. Most of these soybeans are grown in Ontario and Quebec between the Great Lakes and in the St. Lawrence River basin. Canadian non-GM soybeans have an excellent reputation and performance throughout the world, especially in Asian markets where the characteristics of Canadian soybeans are greatly appreciated for the production of edamame, tofu, soy sauce, soy milk and miso. Canadian exporters continue to serve traditionally strong markets such as Japan while growing exports to destinations like Vietnam and Thailand that show great potential for growth.

 

– How do soybeans move along the value chain—from when the farmer delivers to the elevator to final destination?

A – As Canada’s third most valuable field crop, the impact of the Canadian soybean sector extends throughout the Canadian economy. Through Soy Canada, all industry partners work together to maximize the progress and value of the industry.

The full value chain of the Canadian soybean industry extends from public sector research scientists and private sector seed developers to pedigreed seed growers, seed distributors, producers, inland elevators, railways, terminal elevators and ships.

On-farm knowledge ensures the production of high-quality soybeans that meet customer specifications, using techniques that respect Canada’s productive and pristine environment and natural resources. After harvest, soybeans are transferred from farms to grain elevators and then through the cleaning, sorting and grading processes.

Most Canadian soybeans (a record 6 million tonnes in 2018) are delivered to one of Canada’s large coastal shipping ports for export to offshore markets. The remaining soybeans (approximately 2 million tonnes) are transported to Canadian processing plants for transformation into soybean meal and oil, and then end-use products for livestock producers, consumers and industrial markets.

Safety and quality regulation are essential to the industry. Organizations such as the Canadian Grain Commission and the Canadian Food Inspection Agency conduct or oversee monitoring, testing and certification to ensure high standards are met for all customers.

 

– Please list the ways the western Canadian soybean industry could better position itself in the global marketplace and why.

A – Given available land area and crop rotation constraints in eastern Canada, Soy Canada believes the opportunity to substantially increase soybean production in this country rests almost exclusively in western Canada. Pursuit of the following objectives would strengthen the western Canadian soybean industry:

  • Strengthen research that is undertaken by public institutions. Public institutions are well-equipped to investigate factors such as biotic and abiotic stressors and genomic characteristics that impact soybean yield and quality;
  • Seed developers create varieties that respond explicitly to the growing conditions of western Canada. There is a demand for locally-adapted varieties that increase predictable yield and drought resistance in current production regions and extend production into new frontiers, particularly those in which a third option is required for current two-crop (canola-cereals) rotations;
  • Increase predictable protein content. Soybeans are primarily a source of high-quality protein and western Canadian soybeans incur a protein discount compared to soybeans produced in eastern Canada;
  • Expand soybean crushing capacity. There are no large-scale soybean crushing facilities in western Canada and local crushing would support higher producer returns and expanded pork production and exports;
  • Ensure reliable rail transportation and port capacity. Foreign buyers wish to receive their supplies on schedule;
  • Create a local storyline and pamphlet for western Canadian soybeans. The western Canadian soybean sector should strengthen its reputation for quality and reliability by developing and telling its own story rather than permitting others to create the image.

 

– When you spoke with our board, you mentioned the need for western Canada to make its own mark in the global soybean marketplace—tell its own story. Please explain this.

A – The global marketplace for Canadian soybeans is characterized by intense competition from large and well-financed counterpart businesses and sector organizations in competitor countries. When they meet with foreign buyers, it is natural that they elevate the perceived benefits of their soybeans and allude to alleged deficiencies of Canadian/western Canadian soybeans. Unless the foreign voices are countered, it is inevitable that their assertions will eventually become implanted in the minds of foreign buyers and result in scepticism about the quality and relative value of Canadian/western Canadian soybeans.

The initial phase in addressing negative assertions from competitors would be development of an image/storyline that describes Canadian/western Canadian soybeans according to the characterizations that western Canadians want and can defend. The image/ storyline would include a western Canadian perspective on those characteristics, including protein, that are important to foreign buyers.

Phase two would be the presentation the image/storyline in a document that could be used by exporters and sector organizations when liaising with foreign buyers.

Phase three would encompass the consistent use of this image/storyline by exporters and sector organizations.

 

– What’s your view on the soybean industry in five years and then 10 years?

A – In 2016 Soy Canada launched an effort to develop an industry strategic plan that would align the soybean value chain towards achieving ambitious but realistic growth targets over the next decade. After multiple meetings and consultations with representatives from all industry sub-sectors, the strategic plan was finalized and adopted by the board of directors. The plan calls for continued growth between 2016 and 2027 resulting ultimately in 10,000,000 acres of soybeans seeded annually.

Weather-related production challenges in 2017 and 2018 have deferred the rapidity of expansion in western Canada. Nevertheless, it is still anticipated that intensified research and variety development combined with the need for additional crops in rotations and an eventual return to better rainfall will support a renewal and further expansion of acreage.

The table below outlines Soy Canada’s progress towards 2027 targets as outlined in the Strategic Plan.

It’s clear that the western Canadian soybean market has tremendous room to grow. Our farmers should rest assured that, we at MPSG, are working with groups such as Soy Canada to ensure our farmers and our high-quality soybeans are represented proudly and assertively.

Soybeans in Manitoba is recent history. And it will take time for Manitoba’s identity as a dependable, world-class soybean supplier to emerge and command the global attention we know it’s capable of. We’re on the way there now.

The industry has a few immediate hiccups to overcome, and we don’t have all the solutions for them, but we do know—and as Ron pointed out—that soybeans are an excellent and efficient source of protein. The world needs good protein, and at some point, that need will likely trump politics and trade wars.

We’re grateful for Soy Canada’s expertise and we hope you, our farmer members, don’t hesitate to contact them or us with any questions you may have.