Last Updated : 05 March 2013 at 22:00 IST
'Brazil may overtake US as top Soybeans supplier by 2018'
Source :prnews wire
“A surge in South American inventory is responsible for the United States experiencing a steadily declining share of global exports. The 2012 drought has also reduced the supply of soybeans, with US exports falling 7.1% for the year. This situation presents a threat to the soybean farming industry as Argentina and Brazil boost their global presence in the soybean export market.”
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NEW YORK (Commodity Online): Although US soybean farmers have grown in the past five years, the industry will continue to face revenue and profit pressures from international operators, with Brazil expected to overtake the United States as the top provider of soybeans in the next five years.
For these reasons, industry research firm IBISWorld has added a report on the soybean farming industry.
“A surge in South American inventory is responsible for the United States experiencing a steadily declining share of global exports. The 2012 drought has also reduced the supply of soybeans, with US exports falling 7.1% for the year. This situation presents a threat to the soybean farming industry as Argentina and Brazil boost their global presence in the soybean export market.” the report noted.
US soybean farmers have generally been immune to the negative effects of the recession. Unlike most other industries that experienced steep declines in revenue, domestic and international demand for the Soybean Farming industry stayed strong in the five years to 2013.
“The depreciating dollar, coupled with food demand from developing nations, has boosted exports,” says IBISWorld industry analyst Agiimaa Kruchkin, “while the rapid expansion of biofuel production in the United States has spurred soybean farming revenue growth in four of the past five years.”
As a result, IBISWorld expects revenue to grow at an annualized rate of 5.7% in the five years to 2013.
In 2012, the US Department of Agriculture lowered its forecast of soybean harvest yield per acre 18.0% due to an extensive drought. Nevertheless, the reduced supply boosted prices 7.9% that year. On the backs of biofuel demand and rising soybean prices, revenue is projected to increase over 2013.
Despite strong growth, an adoption of genetically modified seeds is reaching a saturation point and is no longer a major source of yield improvement, says Kruchkin. “Additionally, the biofuels segment, which has rejuvenated the industry and continues to strengthen domestic demand, is stabilizing.”
Consequently, growth rates are forecast to weaken slightly in the next five years.
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, 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 from 2013 to 2018.
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