SIC 0116

This industry consists of establishments primarily engaged in the production of soybeans.

NAICS Code(s)

111110 (Soybean Farming)

Industry Snapshot

Soybeans are the second largest cultivated crop in the United States, behind corn, with more than 70 million acres harvested annually. In 2001 the United States produced more soybeans than any other country, producing about 42 percent of the world's total. According to American Soybean Association (ASA), soybeans provided 83 percent of the edible consumption of fats and oils in the United States in 2001.

Soybeans, which possess high quantities of protein, and soybean products are used in a wide range of food and industrial products. Soy products have three major divisions: soy oil products, whole bean products, and soy protein products. Food products include baby food, cereal, diet foods, imitation meats, processed meats, soy sauce, tofu and miso, salad dressings and margarine, cooking oil, candy, and baked goods. Soybeans are used in pet foods and as the leading source of protein meal for U.S. livestock. Industrial uses for soybeans include wallboard and plywood, medicines, soaps and disinfectants, pesticides, fertilizers, candles, linoleum, varnish, fire extinguisher fluid, and paint.

Organization and Structure

Federal policies have affected the output and price of U.S. soybeans. The government has supported soybean prices by setting the bottom price for both soybeans and other competing crops. Under the U.S. Department of Agriculture's (USDA) Commodity Credit Corporation, farmers could borrow money against their crops when they harvested them, with the harvest serving as collateral, and could sell their harvest at any time. At the end of nine months, the farmer had to repay the loan or forfeit the harvest to the government. This program has allowed farmers to sell when prices were high and thus more easily pay back the loan, and it has guaranteed them a minimum price set by the USDA even if market prices dipped below the loan rate. For the most part, soybean prices have been at or above the government loan rate since 1950.

Although there were no restrictions or production quotas for soybeans, programs controlling the production of other crops, such as wheat, feed grains, cotton, and rice, have often cut down on the number of acres available for soybean cultivation, since supply control programs for other commodities prohibited the planting of other crops on that acreage. Reduction of potential soybean acreage, however, has reduced supply and maintains higher soybean prices.

Background and Development

Soybeans, legumes related to clover and peas, were cultivated in Eastern Asia 5,000 years ago, but they were not grown in the United States until the beginning of the nineteenth century, when they were grown experimentally for use as livestock feed. When soybeans were processed into oil and meal, the primary use was for fertilizers. Their use as fodder grew also, but the events of World War II created an increased demand for soybeans for human and animal consumption, causing its industrial applications to expand as well. Because soybeans were an inexpensive protein source, their use has been credited with aiding in the expansion of the poultry industry in the 1970s and 1980s.

Controversy and drops in exports ensued in 1996 when U.S. producers tried to sell a mixture of regular and genetically engineered soybeans to the European market. Though U.S. policy did not require labeling of genetically engineered products, European customers demanded to receive only soybeans that were not tampered with genetically. This controversy cost producers $150 million, almost 10 percent of their European exports.

Although soybean producers have viewed with consternation agricultural bills such as the 1990 five-year act that preserved price controls for soybeans and other crops, they were pleased with the Federal Agriculture Improvement and Reform Act of 1996, which alleviated the fears generated by the preceding agricultural legislation. The American Soybean Association (ASA) welcomed the bill, with its more equitable rate of marketing loans that allows soybean growers similar funds as other major cash-grain growers are eligible to receive. Indeed, soybean production was expected to benefit dramatically from the FAIR legislation because of high domestic and international demand for soybeans. The increasing success of soybeans began in the 1994-95 season, when soybean oil consumption, for example, increased to 13 billion pounds. Moreover, soybean yields, which started to increase prior to the bill, have continued this trend. In 1994 the soybean industry recorded a yield at 41.4 bushels per acre, up substantially from 1993's 32.6 bushels per acre yield, with the total soybean yield a record 2.5 billion bushels. Since 1994, soybean yields have consistently been high as a result of the FAIR Act's provision to allow farmers the flexibility to plant more acres of soybeans. This trend continued through the late 1990s. For example, according to the ASA, soybeans were planted on a record 72.4 million acres in 1998, producing a record soybean crop. However, prices paid to farmers per bushel were the lowest average since 1985, making the 1998 crop value of $13.9 billion lower than previous years.

Current Conditions

In the early 2000s, soybean yields continued to increase and prices continued to fall. ASA data revealed that in 2001 soybeans were planted on 74.1 million acres, producing a record crop of approximately 2.9 billion bushels. However, average prices paid to farmers fell sharply, dropping 42 percent from 1996 levels and lower than 1972's average price. Consistent with past trends, at $12.3 billion the 2001 crop value was much lower than in past years.

Soybeans are grown in more than 30 states, making soybeans the second largest crop in cash sales in the United States, and the largest value crop export. Soybeans and products are now promoted by the ASA in more than 100 countries.

The United States has continued to dominate the export market, in part because of production efficiency, which has created an abundance of soybeans and soy products for exportation, giving U.S. producers the advantage of offering their product at a lower price than producers from competing countries. According to the ASA, U.S. soybean and soybean products exports totaled $7.1 billion in 2001. That year, the European Union (21.5 percent), China (18.7 percent), Mexico (13.9 percent), and Japan (13.4 percent) were the leading U.S. export markets.

The Farm Security and Rural Investment Act of 2002, also known as the 2002 Farm Bill, provided increased levels of support for U.S. Farmers, reducing the intent of past legislation to make farmers more dependent upon the market, as opposed to government support. For soybean farmers, the 2002 Farm Bill provided benefits in numerous areas. In addition to marketing loans and other forms of financial support, it ramped up funding for conservation and bio-energy programs and provided increased support on the trade front by strengthening funds for initiatives like the Food for Progress program.

Further Reading

American Soybean Association. "1999 Soy Stats." St. Louis: ASA, 1999. Available from .

——. "Soy Stats 2002." St. Louis: ASA, 2002. Available from .

U.S. Department of Agriculture. Economic Research Service. "Briefing Room: Soybeans and Oil Crops." Washington, DC: 19 December 2002. Available from .

——. "Oil Crops Outlook." Washington, DC: 12 November 1999. Available from .

——. "Oil Crops Outlook." Washington, DC: 13 January 2003. Available from .

——. "Oil Crops Yearbook—Summary." Washington, DC: October 2002. Available from .

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