Soy shakeup: The challenges and incentives for farmers switching to non-GMO

07 Feb 2023 --- The US Soybean Export Council (USSEC) has released a study outlining recent trends in non-GMO soybean production. It demonstrates a decline in US non-GMO soyfood bean production due to farmers needing more financial incentives to grow the crop, which requires significant investments of time, effort and money to produce.

The continued general rise in commodity prices, yield lag, premium levels and shipping disruptions also factor into the decline of non-GMO soy production, the report flags.

“Right now, we’re in a market environment where we’ve seen increases in price for almost all agricultural commodities. One of the major things that needs to be taken into account with this trend is that premiums have not been able to keep up,” Will McNair, worldwide director of Oil and Soyfood Programs at USSEC, tells FoodIngredientsFirst. 

“This rise in commodity prices has affected soybeans as well. This trend has meant that we’ve seen a push where the economics of the situation have not necessarily kept up for farmers to grow specialty or identity-preserved crops as much as for commodity crops.” 

“With the rapid changes in the marketplace, it’s important to incentivize farmers to grow as much non-GM soybean as the market requires.”

USSEC’s study investigated non-GMO, food-grade soybean acreage across the US. It also conducted hundreds of interviews with soy farmers.

“The farmers in the study have indicated that if, for example, they’re looking to grow the CBOT – the Chicago Board of Trade – price for soybeans, then just a few years ago, it was hovering around US$9, and they were getting paid US$1.75 premium to grow a non-GMO.”

“Yet now, they’re getting paid at the beginning of last season, around $2.25 when prices were around $15,” flags McNair. 

“So, if you’re a farmer and you’re looking at those economics, then you’re losing money sometimes and deciding to grow at the previous structure.” 

The report notes that current non-GMO food-grade premiums have not paralleled commodity prices. In 2021, soybean commodity prices increased by about 48%, while premiums for soyfood beans increased by just 4%. In 2022, commodity prices rose nearly 18%, compared to 13% for non-GMO food-grade soybeans.

Furthermore, many farmers of non-GMO soy also have to invest significant capital into their production while taking on greater risk. 

“There’s a lot of costs involved for the farmer,” says McNair. “For example, if you are growing a non-GM crop, you generally cannot use the same weed chemistry to affect or reduce the weed pressure in your field properly, and you have to do a pre-emergent versus a post-emergent spray,” McNair explains.

“You have to generally, with a non-GM crop, have more sprays on the field, and the types of products used for this are a little bit less effective and more costly.”

Failure to apply these specific safeguards to non-GMO crops can lead to delays in yield.

“You have to spend more on chemistry, and you have to apply more. And if you do not, you will generally get a yield lag as the weed will take nutrition out of the soil or water, which would otherwise help the crop grow,” notes McNair.

GM crops benefit from increased weed protection and, as such, produce greater yields, whereas non-GMO crops will produce a smaller yield. The yield gap between production can result in farmers seeking a premium to compensate for their production of non-GM and the subsequent yield gap.

“That yield gap is major. What we’ve seen and what we’ve heard anecdotally from farmers and breeders is that we’re starting to see more of an emergence of a yield gap, which was not always the case a few years ago.”

Will McNair outlines the problems and incentives for farmers growing non-GMO soy.High demand, low supply
The dip in production comes despite high demand, especially from Japan and China. 

“Purchasers in the study indicated that demand is growing, but with current commodity prices and other factors, farmers have less interest in raising and managing non-GMO and other identity-preserved soybeans as there is less economic value in doing so,” continues McNair. 

“On the demand side, we’ve seen an increase in demand for these specialty crops, whether it comes from places like China who, because of some of their production shortages, are maybe looking to purchase a million metric tons of non-GM soybeans.”

McNair highlights a trend of buyers coming to the non-GMO market looking to make massive purchases.

“We have brokers trying to come into the market and purchase more than Japan combined. Japan is the largest destination for IP non-GMO soybeans used for food applications, and they say, can we start it next week? That dynamic is a bit difficult.”

“It’s a shame because US farmers are interested in being able to supply them, but it’s hard to do without planning in advance and with the volatile markets right now,” he says.

Incentives for farmers Demand for soy is high but financial incentives to grow non-GMO are low, leading to a dip in supply.
McNair notes that farmers are willing to grow non-GMO soy if specific incentives are implemented. 

“There’s a few things generally used to incentivize farmers,” he explains. “In the survey that we put out, one of the things the farmers were interested in was an increased premium, but also some guarantee to ensure that they have some sort of guaranteed amount per acre.” 

In addition to understanding current acreage trends, the study notes factors that could increase production. Farmers comment that higher-yielding varieties and minimum price guarantees would influence their future planting decisions.

“What can also be done is a new chemistry for weed protection so that, again they do not see as much weed pressure,” concludes McNair. 

In related news, the Food and Agriculture Organization (FAO) Food Price index – the benchmark index of food commodity prices – has dropped for the tenth month in a row. The January decline was driven by drops in the price of vegetable oils, dairy and sugar, while cereals and meat prices remained largely stable. The index averaged 131.2 points in January, which was 0.8% lower than the prior month and 17.9% below its peak in March 2022.

The FAO vegetable oil price index declined by 2.9% in January, while diminished demand for palm and soy oils caused a drop in global prices. Sunflower and rapeseed oils’ prices also dipped due to ample export availability. https://www.foodingredientsfirst.com/news/world-food-prices-decline-for-ten-consecutive-months-cereal-supplies-forecast-to-tighten.html

By James Davies