SOYBEAN PRODUCERS will garner a lot of attention from seed suppliers over the next few years, as suppliers work to maintain their share of the shrinking soybean market. What this means for producers is good seed supplies and aggressive marketing from companies working hard to secure their business.
With more soybean acres giving way to corn, producers are expected to scale back on 2007 soybean seed purchases. The USDA March “Prospective Plantings” report gave the market its first clear picture of the shift, indicating that growers intend to plant 90.5 million acres of corn this year, 15% more than 2006's 78.3 million acres and the highest acreage total since 1944. That's at the expense of soybeans, where acreage is expected to be 67.1 million acres, down 11% from last year, when producers planted 75.5 million acres of soybeans.
Over the next few years, it's anyone's guess how long the corn shift will last. But given the current supply and demand situation, don't be surprised to see corn acreage to again top 90 million acres in 2008.
For soybean seed suppliers, that means the same companies will compete in a market that at best remains the same, and at worst is even smaller than in previous years.
“There's going to be some volatility in the soybean seed business,” says David Thompson, director of marketing for Stine Seed Company, Ames, IA. “In the overall picture, the pie is getting smaller, and the same people are selling to that acre. What we have to do is determine the best way to maintain our market share.”
“The magnitude of the switch to corn probably won't be fully known until July 1, when the dust settles and we sort everything out,” says Don Schafer, senior product line manager for soybeans at Pioneer. “All our market surveys, from industry analysts to our sales staff, point to fewer bean acres in 2007, but there also is a lot of indecision out there.”
Producers always make last-minute switches out of one crop and into another. But it's the magnitude of the potential switch in 2007 and 2008 that has seed companies working diligently to ensure product is available.
Companies are gauging next year's market demand and are completing work to secure acreage to grow the 2008 seed crop. Here, too, they've seen the impact of corn.
Pioneer says that, although it didn't have significant difficulty securing soybean seed acres, there were areas where the boost in corn acreage made getting those last few acres of soybean seed more challenging. “A soybean acre that's lost to corn isn't something we can make up,” Schafer says.
Steve Sopher, agronomist and regional sales manager with Latham Seeds in Alexander, IA, says the company grows 90% of its soybean seed supply locally, so securing acreage hasn't been a huge concern. And while the company provides most of the storage for those soybeans, it has found securing outside storage more difficult. “Producers are locking up storage for corn so they can deliver directly to ethanol plants,” he says.
Jon Scharingson, agribusiness marketing manager for soybeans at Syngenta, explains that the corn increase in 2008 is expected to take more soybean acres out of production in the Corn Belt but says that strong soybean prices may shift where additional soybeans are planted. “There will be a lot of corn near ethanol plants,” he says. “But soybeans should start grabbing acreage away from cotton in the South, wheat in the north-central plains, and we're even starting to see an expansion of soybeans in the Delmarva area. I think we'll be sitting on 60 million to 65 million acres of soybeans for the next three to five years.”
Soybean seed suppliers aren't taking the reduction in acreage lying down. “We've been strongly enhancing our breeding program, and we see areas where there are big opportunities to make market share gains,” Scharingson says. “In a flat or diminishing market, we plan to aggressively go after soybean acres.”
Pioneer's Schafer says the company remains committed to soybeans and will work hard to stay on the farm. “We are able to offer a full portfolio of corn and soybean products to producers,” he says. “And while we are able to capture market share for corn, we also want to ensure our soybeans remain on every acre.”
At Latham Seeds, its focus remains on providing the best varieties. “We will continue to focus on soybeans and work harder than ever to bring the highest-yielding, best defensive traits to market so we can be at a competitive edge,” Sopher says. “It's going to be tough, but it's been tough everywhere for the past several years to make money on soybean seed. Next year will be no exception, although the pressures will be greater.”
With the dynamics set in place for 2008, does that mean a significant price war to ensure market share? Perhaps, but seed companies stress that maintaining a quality product and delivering service to the customer will remain paramount. “In a shrinking market, it's even more imperative to show your value to the customer,” says Tom Schaefer, U.S. soybean marketing manager for Asgrow. “We will have the normal trade discounts and programs that we've always offered.”
Syngenta has been heavily marketing its AgriEdge program, which offers producers a premium for using a portfolio of the company's products.
One area that does offer opportunities for increased premiums is the value-added soybean products for food and industrial applications. But those seeking identity-preserved soybeans are also competing against corn acres. “I tell producers that if you're planting more corn, at least plant some Vistive low-linolenic soybeans to get the extra $0.60/bu.,” Sopher says.
The commitment to soybeans will remain. “Farmers are comfortable with soybeans and how to grow them. They like it as a crop,” Thompson says. “Soybeans are still a good crop that's fairly weather resistant and can be grown in areas that are less conducive to corn.”