A Not So-y Simple Situation

June 24, 2009



Soyfoods: The U.S. Market 2009 report, which was released in May by Soya-tech (Southwest Harbor, ME), states that retail sales of soyfoods products surpassed the $4 billion mark in 2008 for the first time in history.

For manufacturers of soy products, demand from consumers has been higher than expected. However, the amount of soy grown in the United States has not necessarily increased to keep up with demand from the United States and abroad.

"Supply and demand [of soy] are running in different directions," says Jessica Minskoff, a dietician based in Washington, DC.

There are several reasons for this gap. One is competition from imported soybeans that has kept U.S. growers from planting the volume of soybeans they used to. Other problems, such as weather issues, have also hampered U.S. production.

Foreign Supply Versus U.S. Supply
A study conducted by the Cornucopia Institute (Cornucopia, WI) estimates that as many as 50% of organic soybeans consumed in the United States are imported from China.

Since the U.S. Department of Agriculture (Washington, DC) does not track imports of organic farming products, there is no government data available on the exact quantity of organic soybeans imported from China. However, based on a survey of "nearly every soy food brand in the United States," the Cornucopia Institute concludes that about 100 million kg of Asia-grown organic soybeans, nearly all Chinese, were imported to the United States between March 2008 and March 2009.

HEXANE AND ORGANIC SOY PRODUCTS

HEXANE IS USED BY FOOD MANUFACTURERS as a solvent to extract edible oils from seed and vegetable crops. It is a colorless, neurotoxic liquid produced as a by-product of gasoline refining. In 1992, the Environmental Protection Agency (EPA; Washington, DC) determined that hexane was not classifiable as a human carcinogen; therefore, FDA does not require that companies test for hexane residues before marketing their products.

In May, an investigative report by the Cornucopia Institute (Cornucopia, WI) concluded that soy goods touted as organic may be laced with hexane, and therefore are unlikely to be 100% natural. Researchers noted that during the last stages of soy processing, even for organic products, many soy pods are bathed in the substance.

To use the label "organic," only 70% of a product actually must fit that definition. "When this is the case, there is a 30% window that allows for hexane residue left by the extraction process," says Jessica Minskoff, a dietician based in Washington, DC.

In order to conduct its testing, the Institute studied hexane residues in soy meal and soy grits available from more than 15 finished soy product brands. Average hexane residues of approximately 21 ppm were discovered in soy meal commonly used to produce soy protein for infant formula, protein bars, and vegetarian food products.

Many health and environmental enthusiasts have been eager to jump on the organic trend, she continued, believing they are consuming healthier food products and also saving the environment from certain pollutants. The study challenges the idea that organic is always safer.

"It comes down to a consumer confidence issue," Minskoff says. "If organic is always safer, consumers need to know the risks that are still at hand."

"The organic label does assure consumers that the food was produced in a more sustainable way than conventional foods," says Charlotte Vallaeys, Cornucopia's farming and food policy analyst. "The vast majority of organic food manufacturers believe deeply in the principles that are foundational to the organic movement. But the system is not perfect."

Because demand for U.S. soybeans has not been nearly as high as demand for soybeans from foreign countries such as China, U.S. soybean growers have slowed down planting. As a result, the United States' supply of soybeans will be the "smallest ever" this summer, according to a May Agriculture Online report. The estimate represents the 2009 soybean crop year that ends at the beginning of September.

The report's estimates place 2009 U.S. soybean supply at up to 77 million bushels-a huge shortfall from the USDA's May estimate of 130 million bushels and its previous April estimate of 165 million.

This is an "extraordinarily tight number by historical-or any-standards," noted Vic Lespinasse, a Chicago board of trade market analyst and floor trader.

"The underlying threat to production from loss of acreage is real," said Tim Emslie, an analyst for Country Hedging (Minneapolis). There were some 13 million acres of U.S. soybeans that should be in the ground that were not as of May 24, Emslie noted.

Trying to catch up with demand, farmers are rushing to plant more soy now. However, late planting dates will mean tighter supplies of U.S. crops in the coming year, which is a worry, Minskoff says, especially since the United States is used to being the largest food exporter in the world. Minskoff is not alone in her qualms.

"This is a situation that should not be underestimated," wrote analyst Dave Norris, a former agricultural commodities broker, in the Agriculture Online report. "With late plantings and therefore [late crop] maturity and harvesting...the United States is in very real danger of running out of soybeans this year," he concluded.

Also, due to weather, planting delays in the eastern Midwest may also lead to smaller corn and soybean crops. It is possible that farmers may switch acres intended for growing corn to growing soybeans instead.

"The consensus among analysts is that 1 million acres for intended corn could be switched to soybeans if it immediately stops raining in the Eastern Corn Belt and the mid-South," said Norris.

SOY SAVVY

INTEREST IN SOY PRODUCTS IS HIGH. In 2007, a survey by the United Soybean Board found that 37% of Americans specifically seek out natural soy foods for health reasons, while 33% of Americans consume soyfoods or soy beverages once a month or more.

Consumers are also interested in learning about soy. When FDA approved a health claim in 2006 that said "25 grams of soy protein per day may reduce the risk of heart disease," 85% of respondents in the same survey wanted to know more information about the amount of soy protein received in products on the market.

Meanwhile, traders expect soybeans to be planted at a 65–75% rate this year, compared with a typical pace of roughly 80%.