Soybean IP market under pressure

Wednesday, December 19, 2007

by MARY BAXTER

Speaking at the Dec. 11 meeting of the Ontario Seed Growers’ Association, Leo Guilbeault, chair of the Ontario Soybean Growers Association and Jeff Schmalz, executive project director of Soy 20/20 outlined both concerns and hopes for IP soybeans.

Guilbeault listed a number of pressures, including:

• A perception among buyers of the beans, most of whom are based in Asian countries, that the risk of contamination of IP beans with genetically modified varieties (GMO) is growing as GMO use becomes more widespread in North America;
• Premiums growers receive for growing the beans have remained the same over several years. Meanwhile, yields of more easily maintained GMO beans are dramatically increasing and now offer a competitive earning potential;
• The number of farmers involved in the IP programs is dwindling;
• Development of IP bean varieties is trailing that of other varieties;
• Although there are two major bean crushers in the province, there is a lack of niche bean processing capacity in Ontario; and
• Grower knowledge of the beans’ end markets is lagging.

Nevertheless, with effort, the IP market could pose a solid alternative to commodity markets, Guilbeault said.

But choosing to do so requires growers to decide whether they want to continue to invest in IP production and get involved in other aspects of soybean processing.

“Do we just want to grow the soybeans or do we want a hand and a share of the profits of processing them also?” he asked. “We need to have a new look at how we’re going to address the soybean industry as growers, in the future here.”

He emphasized that establishing niche processing capacity in the province “is going to have a big effect on how we see our industry expanding and growing and being more profitable here.”

If the decision is to continue to invest in IP production, then steps will have to be made in the next one to two years and Guilbeault sees the Ontario Soybean Growers Association playing a lead role by bringing industry, markets and financing together to build these new markets.

In a separate presentation Schmalz described the future of soybeans as “very bright,” but, like Guilbeault, emphasized the need to commercialize processing opportunities and create more opportunities for farmers to get involved in aspects of soybean processing.

He noted Ontario soybean growers have a lot of advantages, including an established IP system, an ability to adapt, world class researchers, proximity to major markets and a reputation for producing quality beans.

Yet Ontario’s annual three million acres of soybeans is a far cry from the double digit millions annually produced in the U.S., Brazil and Argentina. Finding small and medium-sized niche markets is one way that the province’s growers can differentiate themselves from the pack, he said.

Schmalz used soy wax as an example, pointing out that Canada’s largest candle maker currently buy $17 million annually of paraffin (petrolium-based wax) from China. Even obtaining a 10 per cent portion of this market “would be a great opportunity,” he said.

Soy 20/20 is also working with a Toronto-based company that is switching from using an oil-based solvent to a bio-based solvent called methyl soyate, a product that poses “a 150,000 acre opportunity,” he said.

Like Guilbeault, Schmalz emphasized the need for flexible crushing of specialty oils. He noted that this year, 10,000 acres of low linolenic soybeans were grown in Ontario.
“They all went to Michigan to get crushed,” he said.

Toronto is the second largest centre of food processing in North America and so far, Canada’s soy food industry is undeveloped. He suggested both of these factors indicate growth opportunities for food-grade soybeans with special traits.

Schmalz also noted that over the past year Soy 20/20 has supported the retail launch of a meat alternative product line, helped to commercialize the Canadian production of edamame - green vegetable soybeans - and was involved in negotiations to establish a soybean flour processing plant in the province.

While the organization continues to try to foster biodiesel opportunities, Schmalz downplayed the fuel’s impact on soybean production. He pointed out that Canada doesn’t have the same government assistance for the development of the plants as in the U.S., which “perhaps is a good thing.”

Right now, the only biodiesel plants that are up and running in the U.S. are ones that can make use of different feed stock, he explained.

Schmalz was more optimistic about the opportunities presented in the development of bio-polymers. BF