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Spring 2012

Options Examined That Could Increase Availability of More U.S. Farmland

What may have worked nearly 30 years ago may not work today. For example, so-called federal “swampbuster” restrictions put in place in 1985 prevent some U.S. farmers from putting low-lying acres classified as “farmed wetlands” into production. The United Soybean Board’s (USB’s) Global Opportunities (GO) program examined options that could apply modern soil and water conservation practices on these lands to improve their productivity for U.S. soybean farmers.

A new checkoff-funded study looks into federal “swampbuster” restrictions that prevent some U.S. farmers from putting low-lying acres into production. Modern drainage systems and soil and water conservation practices could make a case for allowing some U.S. farmers to utilize areas that have previously been required to be set aside.

“We’re looking at U.S. soybean farmer profitability and people who need our soy,” says Jim Call, USB director and soybean farmer from Madison, Minn. “If we could improve drainage in some of these areas, it would help productivity. We would have more soybeans to meet demand here in the United States and abroad. It would be a huge plus for U.S. soybean farmers.”

Many of these areas consist of low-lying points in a field that can be challenging to plant because of moisture that collects after heavy rainfall. Modern drainage systems and soil and water conservation practices could make a case for allowing some U.S. farmers to drain and plant areas that have previously been required to be set aside if they participate in federal farm programs.

“We’re talking 9 billion people on this globe by 2050,” adds Call. “We’re going to have to increase production to supply our customers’ needs. As farmers, we have these little spots out in the field, and it can be a problem for farmers to farm around these things.”

USB Examines How Tax Credit Could Spur Railway Investment

As soybean production continues to increase and expand in the north and western regions of the United States, U.S. railways have become a vital component of transporting U.S. soy. This mode of transportation differs from roads, bridges or waterways because the railroads, elevators, co-ops, grain processors, ethanol plants and biodiesel plants pay for and own their own rail lines and rail sidings. These companies spend billions of dollars annually to maintain these rails. Unfortunately predictions show that this private investment will not be able to keep up with the cost of maintaining railways in the future. In fact, it’s estimated that railroad companies could have a shortfall of $40 billion in funding between now and 2035.

Twenty-four percent of soybeans, 43 percent of soy meal and 67 percent of soy oil travel via U.S. railways at some point during the trip from the farm gate to the end user. Investment shortfalls threaten this important link in the U.S. transportation system.

“Being from North Dakota, the main rivers we have in the eastern side of the state flow north, and, unfortunately, that doesn’t move many soybeans,” says Jared Hagert, soybean farmer from Emerado, N.D., and member of the United Soybean Board’s (USB) Global Opportunties (GO) committee. “Rail is very important in our area. Almost all of our products are exported to the Pacific Northwest and then on to international customers. We need to use the rail system to ultimately serve our end users.”

The Soy Transportation Coalition, made up of USB, the American Soybean Association and 11 Qualified State Soybean Boards, made this study one of its top priorities in 2012. USB’s GO program plans to study the economic impact of a potential 25 percent federal tax credit that would encourage private investment in railway improvements.

“We hope to learn a number of things from this study,” says Hagert. “One of them would be to demonstrate how the investment tax credit would narrow or eliminate gaps in funding between the future planned rail investments and the needed rail investment. We also hope this study highlights the job-creating potential of enacting such a tax credit.”

The study will be available in fall 2012.

Soy Checkoff Wants to Defuse “Ticking Time Bomb”

U.S. soybean farmers use different modes of transport to get their soybeans to end users. The inland waterway system represents one very efficient mode many farmers and the rest of the soy industry rely upon. But it’s also one that has become a weak link in the U.S. transportation chain. A recent study titled “America’s Locks and Dams: a Ticking Time Bomb for U.S. Agriculture” and funded by the United Soybean Board’s (USB) Global Opportunities (GO) program found that the crumbling locks and dams on the inland waterway system pose a costly risk to U.S. farmers and consumers.

The U.S. Army Corps of Engineers evaluates and prioritizes the maintenance and rehabilitation of the 221 river locks it operates. A new USB study will examine alternative methods to fund the maintenance of inland waterway system structures.

Up to 89 percent of U.S. soybeans exported through the lower Mississippi ports, such as the Port of New Orleans, arrive there via the locks along the Mississippi, Illinois and Ohio Rivers.

“There are many ways that we farmers ship our products, both domestically and internationally,” says Laura Foell, GO program chair and soybean farmer from Schaller, Iowa. “We use barge, rail and truck here in the United States. But 22 percent of all transported tonnage of ag commodities is shipped in river barges through our lock and dam system.”

More than half of the locks and dams that currently make up the U.S. Inland Marine Transportation System exceed their 50-year usable lifespan, according to the report. This conclusion is borne out by the number of hours that locks have been out of service. Just on the Ohio River alone, delays caused by inoperable locks have more than tripled since 2000, rising from 25,000 hours to 80,000 annually.

And that gets expensive. This study shows that a three-month lock closure would increase the cost of transporting 5.5 million tons of oilseeds and grain, the average amount of grain shipped by barge during that period, by $71.6 million. A failure at any of the locks examined by the study could cost U.S. farmers up to $45 million in lost revenue.

“The lock and dam system is rapidly deteriorating, which puts added pressure on the rail and highway systems to move our products from the farm to its destination, whether it be here in the United States or for the export channel,” adds Foell.

USB will continue to examine this issue. The GO program partnered with the Soy Transportation Coalition on this study and on another to examine alternative methods of funding that can be used to support the U.S. lock and dam system. The study examining new options to fund repair of aging U.S. locks and dams should be available in fall 2012.

U.S. Soy Can Have a Competitive Advantage in Africa

Export credit guarantee programs administered by the U.S. Department of Agriculture, the ability to ship smaller amounts of soy using containers, and increased interest in using more soy for human consumption demonstrate U.S. soy’s advantages over competition from Argentina or India. A recent study funded by the United Soybean Board’s (USB) Global Opportunities program, “Market Potential of Sub-Saharan Africa,” uncovered these advantages and where in the region they can best be used to increase sales of U.S. soy.

Some countries in western and southern Africa may face a shortage of 1 million metric tons of soybean meal and 450,000 metric tons of soybean oil in the coming years. This gap will continue to widen as rising personal incomes create demand for meat and oil. Argentina currently ships most of the soy needs for this region. However, niches exist where U.S. soy has competitive advantages.

USB chair Vanessa Kummer (center), a soybean farmer from Colfax, N.D., and 2010 USB chair Phil Bradshaw (second from left), a soybean farmer from Griggsville, Ill., met with end users of soy in Ghana last fall. Efforts such as these help to build relationships that could increase U.S. soy exports to western and southern Africa.s competitive advantages.

“The countries in the central part of Africa have growing economies,” says Vanessa Kummer, USB chair and soybean farmer from

Colfax, N.D. “In fact, Ghana has a democratic government that is really trying to help its people develop agriculture and educational opportunities. It’s important for U.S. soybean farmers to be developing that market.”

The study reviewed 48 countries that make up sub-Saharan Africa, but U.S. soy products do not have the competitive advantage in all of those countries. Countries where U.S. soy has the best potential include Senegal, Tanzania, Nigeria, Ghana and Kenya.

As USB continues to look to diversify soy export markets for U.S. products, the western and southern regions of Africa provide new opportunities. U.S. exporters should capitalize on the advantages in countries where U.S. soy products remain competitive and grow markets for U.S. soy there.

“As the economy grows in this region, so does the demand for soy,” adds Kummer. “Some of the help that we give them today could help build future markets, and, by being an ally to them now, we’ll develop long-term relationships in these countries.”

USB Task Force to Examine Value Capture Pricing for U.S. Soybeans

A recent survey conducted by the United Soybean Board (USB) gauged U.S. soybean farmers’ feelings on and knowledge of the soy checkoff and soy industry. The 2012 Winter Survey examined knowledge and awareness of what creates value for U.S. soybeans and the importance of protein and oil content. Only 8 percent of farmers surveyed knew the protein and oil content of the soybeans from the varieties they planted last year. Thirty-nine percent believed there could be a positive correlation between the price they received for their soybeans and the protein and oil content.

The United Soybean Board’s Long-Range Strategic Plan adopted last year reflects the true value of U.S. soybeans: the meal and oil. To better serve customers of U.S. soy, the industry will need to start seeing and even paying for soybeans as protein and oil.

“At USB we have created a Value Task Force to look at our marketing system and try to come up with a way to capture value,” says Marc Curtis, USB immediate past chair and soybean farmer from Leland, Miss. “It’s our intention for this to be a system to capture the actual value of the bean rather than have a premium or a discount system. We want to be able to evaluate on a load-for-load basis what the actual value of the bean is.”

More often customers who buy U.S. soy say they do not buy soybeans, they buy protein or oil. Because of this request from domestic and international customers, it’s becoming more important for U.S. soybeans to meet protein and oil specs to ensure U.S. soybeans remain the world’s preferred soybean.

“Two of the objectives in the strategic plan are meal and oil,” adds Curtis. “We’re talking about valuing oil on its real value and valuing the protein or the meal on its real value.”

The farmers on the task force will examine the soy value chain to further understand what drives decisions and what opportunities exist to change the U.S. soy value discussion and increase benefits to the entire market.