Could Saskatchewan Be a Soybean King? - PulsePoint
August 17, 2018
Market opportunities for Saskatchewan soybeans
By Brennan Turner, FarmLead
When one thinks of soybean production in Canada, historically, all attention has been put on Ontario and Quebec. Then about a decade ago, we started seeing a significant uptick in soybeans getting planted in Manitoba. Now, the area of dirt in Saskatchewan getting seeded with soybeans is becoming the headline.
Canada’s five-year average for soybean seeded acres is 6.05 million (M) acres. Specific to Saskatchewan, the five-year average is 360,000 acres (or about six per cent of all acres). For this year, in 2018/19, it is estimated that Canadian acreage will fall 13 per cent year-over-year to 6.32 M acres. In Saskatchewan, the reduction is much more pronounced, down 41 per cent from last year’s record of 850,000 acres to just 407,500 this year. This is mostly attributed to last year’s poor yields and farmers opting out for different oilseeds for their rotation.
However, last year was not likely to be an asterisk in the years to come. Back in 2012, there were just four soybean varieties that were able to be grown in less than 115 days (also known as short-season varieties). Today, there are 80. There are also some very early varieties now out on the market. Thus, those growers farming in areas with less heat units (ex. Saskatchewan) are suddenly finding themselves with an additional option for their crop rotation.
So, if more soybeans are getting grown in Saskatchewan, where are they going to all go?
On the domestic front, Agriculture and Agri-Food Canada (AAFC) is forecasting that 1.9 M tonnes will go into the food and industrial (otherwise known as crush) sector in 2018/19, slightly higher year-over-year. However, what is more noticeable is the drop in the feed sector. AAFC is expecting just 310,000 tonnes of soybeans in the feed/waste/dockage column, down 65 per cent year-over-year after last year’s record use. This is mainly attributed to the smaller crop though this year. However, we continue to see growing interest from livestock producers on the FarmLead Marketplace to buy more product directly from growers and roll the product themselves into feed.
In June AAFC was forecasting 2018/19 Canadian soybean exports at a record 5.3 M tonnes. This would be up 15 per cent, or 1.3 M tonnes, from last year’s record of 4.6 M tonnes. It has been suggested that China will buy and ship in 2.13 M tonnes of Canadian soybeans. That is up 15 per cent year-over-year.
Up until recently, though, Europe was the major purchasing agent of Canadian soybeans, accounting for about half of all soybeans shipped out of the Great White North. Despite them losing the title of main buyer of Canadian soybeans to China three years ago, they still imported more than 1.7 M tonnes in 2017/18, up 21 per cent year-over-year. Impressive export growth rates have also been seen around Asia, with exports to the region (excluding China) up 84 per cent last year.
If we break this all down, demand for high-protein feedstuffs continues to support the expansion of soybean production not only in Saskatchewan, or Canada, but around the world. And nowhere is this demand more omnipresent than China. The country is seeing a middle class that is growing by about a million people per month. When there is more middle class, the demand for the meat increases and the driver for protein is feedstuffs. More specifically, China’s imports of soybeans have increased by nearly 60 M tonnes over the past decade, basically tripling. The elephant in the room though that it is potentially holding easy wins growth opportunities back, is the ongoing trade war. With China now charging a 25 per cent import tariff on United States (U.S.) soybeans, a game of musical chairs has begun. This means that more U.S. soybeans will be heading into markets like the European Union and other Asian markets that Canadian soybeans have come to enjoy. Conversely, more Canadian soybeans could be headed to China.
The main takeaway here is that we at FarmLead continue to be bullish on oilseeds, and thus, soybeans. The trend of increasing demand for protein is not going to reverse any time soon. Thus, there will be continued growth opportunities, not only in China, but also emerging markets in China, and later down the road, even Africa. Putting soybeans into your rotation is something for which there is a lot of literature out there, but you can be assured there will likely be a feed, crush, or export marketing opportunity waiting for your harvest.