Asian Soybean Demand Rise due Animal Feed and Biofuel Production

Soybean commodity - Recessionary trends in global economy have not impacted US soybean farmers on rising Asian demand for animal feed and biofuel production in USA, according to a new report from IBISWorld.

Depreciating dollar has also helped push exports from USA in recent years, according to IBISWorld Industry analyst, Agiimaa Kruchkin.

As a result, IBISWorld expects revenue to grow at an annualized rate of 6.4% in the five years to 2012. In 2012, the US Department of Agriculture (USDA) has lowered its forecast of soybean harvest yield per acre 18.0% due to an extensive drought. Nevertheless, the reduced supply will boost prices 8.0% - 20.0%. Therefore, an industry revenue increase of about 7.2% between 2011 and 2012 to $39.9 billion is expected by the end of the year.

Despite strong growth, the adoption of genetically modified (GM) seeds is reaching a saturation point, no longer a major source of yield improvement. “Additionally, the biofuels segment, which has rejuvenated the industry and continues to strengthen domestic demand, is stabilizing,” adds Kruchkin. “Consequently, growth rates are forecast to slightly weaken in the next five years.” A surge in South American inventory is responsible for the United States experiencing a steadily declining share of global exports.

The 2012 drought has reduced the global supply of soybeans, with US exports expected to fall 6.8% for the year. This situation presents a threat to the industry as Argentina and Brazil boost their global presence in the soybean export market. The Soybean Farming industry is overwhelmingly characterized by family-held individual farms. In most cases, soybean producers operate as partnerships and sole proprietors rather than corporations. Despite some farm consolidations, the industry remains fragmented. There is a long-term trend toward fewer farms across the agricultural sector, and this applies to the Soybean Farming industry as well. This trend is a result of rising costs and competition that make it difficult for smaller farms to succeed.

During the next five years, soybeans are anticipated to maintain their position as the second-largest crop in the United States behind corn. The crop's primary uses (in livestock feeds, vegetable oils and biofuels) are unlikely to change, even in the medium- to long-term. Still, as a typical agricultural product, the Soybean Farming industry is heavily exposed to volatility from external factors, such as weather conditions, market prices and government subsidies. Consequently, profit margins may vary greatly from year to year. Despite this uncertainty, continued biofuel demand will support a steady rise in soybean prices. IBISWorld forecasts industry revenue to increase through.