The Miracle Bean - Losing Value
By Mark Steil quoting Richard Levins
Minnesota Public Radio
February 12, 2002
One of Minnesota's major cash crops has lost a little bit of its luster. Soybeans are
sometimes called a miracle grain. Besides their food value, they can be made into diesel
fuel, plastic, ink and more than 2,000 other products. In fact, it seems the only thing
farmers can't make from soybeans these days is money. The problem is that other
countries have discovered the crop, and are planting it in record numbers. This has caused
a chain of economic events which has farmers scrambling to find ways to make new
money off an old crop, the miracle bean.
The Miracle Bean
Soybeans used to be called the miracle bean, because of their many different uses - and
because they used to bring high prices. But prices have gone down as production around
the world has gone up.
(Photo courtesy of USDA)
Soybean cultivation began in China more than 5,000 years ago, where it was called the
"greater bean." "Great" seems to be the right word for a yellow legume that could power
the world - fuel for diesel engines as well as food for the human machine. But on a windy
winter day, seated in his southwest Minnesota farm home, Bob Kirchner says in many
ways, soybeans now are just another crop.
"It used to be that soybeans were probably the premier one as far as generating income of
the grains. Now it's still as good - if not better - than many of the others, but it's just not
near as good as it used to be," says Kirchner.
Soybean prices underscore his point. Five years ago, soybeans brought $6 or even $7 a
bushel. But since then, prices have tumbled by 40 percent. Soybeans right now fetch
about $4 a bushel. Soybean producers once had an optimistic slogan, "beans in the teens,"
reflecting a belief the miracle crop would bring miraculous profits. There seems no
chance now that soybean prices will ever reach $13 or $14 a bushel, so farmers like Bob
Kirchner are looking for new ways to make money.
"You have two choices - either to horizontally expand, keep farming larger and larger
operations on almost non-existent margins, and hope for government price supports. Or,
you look at adding some solid margins to your operations that aren't derived from
government price supports, which I think is a much sounder alternative," he says.
Kirchner helped organize a cooperative based on option two. About 2,300 other farmers
from four states have banded together to build a soybean crushing plant in southwest
Minnesota. It should add at least 50 cents a bushel to the price of their soybeans.
Phil Warnken, president of AgBrazil, in a soybean field in the Western Bahian region of
Brazil. March, 2001. Higher soybean production in Brazil is lowering prices for U.S.
soybean farmers. See more images of soybean farming in Brazil.
"The prime motivation is to bring some profits back to the farm, some cash, which we
desperately need," says Kirchner.
The profits really flowed when U.S. soybean producers dominated the world market in
the 1970s and '80s. But that's no longer true. South American soybean production has
increased steadily, and now equals U.S. output. Brazil, the star perfomer, has doubled
production since 1991.
"Brazil...has somewhat of an unlimited capacity to expand," according to U.S.
Agriculture Department economist Keith Menzie.
That worries southwest Minnesota farmer Bob Kirchner and other U.S. soybean
producers. The more soybeans Brazil produces, the larger the world supply is - which
tends to hold down prices.
The source of Brazil's growth is a mostly untouched Alaska-sized grass and shrub
landscape, known as the cerrado. It covers much of interior Brazil south of the Amazon
rainforest. Once believed infertile for crops, the use of fertilizer pushes the soil of the
cerrado to produce better soybean yields than choice U.S. ground.
New Zealand native Chris Ward now lives and farms in Brazil's cerrado. He's never seen
a crop failure because the region's tropical climate yields generous rainfall.
"It's exciting, because you kind of see things happening. I've been there 16 years planting
and we've seen tremendous changes. We started off when I first went there (with) 25bushel yields. We're talking now an average of 60," says Ward.
That's far above the 50 or so bushels per acre that Midwest farmers count on in good
years. Because the cerrado is still relatively remote, with few highways or railroads, it's
expensive to ship in the basic ingredients of soybean production. Farmers there pay twice
as much as U.S. producers for fertilizer. But they have one big advantage - cheap land.
An acre of prime Midwest farmland costs six times or more what an acre of land in the
cerrado brings. The USDA's Keith Menzie says that means Brazilian farmers can profit
on soybean prices which are money losers to American producers.
"Speaking to one or two farmers down there, it seemed to me that they are comfortable
with soybean prices in interior Brazil as low as $3.50 to $3.75 a bushel. (They) can still
make a little bit of a profit at that level," says Menzie.
So even the current $4 price of soybeans signals continued growth in Brazil. In the U.S.,
high land costs means farmers need more than $5 a bushel to break even.
Government subsidies have kept prices in that range the last few years. In Brazil, the
harvest is just beginning, and it's expected the crop will be at least 10 percent larger than
last year. Brazilian farmer Chris Ward says the expansion will continue, because many
people there want to give farming a try.
"If he's got a piece of land and a tractor, and he thinks he's going to have a go, he'll take
all the risks in the world," says Ward. "A banker or stock broker would say 'you're
wasting your time, you're going to go broke.' But he won't listen, he'll have a go."
Not all the land in the cerrado is suitable for crops, but enough is to fuel decades of
growth. By one estimate, the potential cropland there equals the combined area of
Minnesota, Wisconsin, Iowa, North Dakota and South Dakota.
Southwest Minnesota soybean farmer Bob Kirchner is joinging about 2,300 other farmers
from four states, who have banded together to build a soybean crushing plant in
southwest Minnesota. It should add at least 50 cents a bushel to the price of their
soybeans.
University of Minnesota agricultural economist Richard Levins worries that means an allout soybean war, a race to the price bottom, as producers worldwide try to lower their
cost of production.
"If we continue this competition, I think one big loser is going to be the environment,"
says Levin.
He says Brazil will pay an environmental price as wild areas are plowed under. In the
U.S., he worries farmers pressed by the bottom line will cut corners to produce soybeans
more cheaply. He says that could aggravate field erosion, causing more soil and farm
chemicals to enter already sediment-rich streams and rivers.
"Winning is almost worse than losing," says Levin. "The only way you win is to be the
absolute cheapest competitor in the world. We cannot build a strong environment and
strong rural communities based upon cheap products."
But for many farmers, those types of global concerns seem distant. They're more
concerned with trying to make a living today. Bob Kirchner says the 2,300 farmers
who've joined Minnesota Soybean Processors to build a crushing plant have contributed
an average of $12,000 each. That's about $28 million. Kirchner says the silver lining in
low soybean prices is that it makes taking a risk on something like a crushing plant a lot
easier.
"You can make many things with soybeans - economically - that just a couple years back
you couldn't. Because it would be a little bit out of the price range. For example,
biodiesel now is in the range where it's getting cost competitive to traditional diesel fuel,"
says Kirchner.
If biodiesel finds a wide market, Kirchner says it's something the soybean crushing plant,
with some additional equipment, could easily make. He says that's his vision of the future
for the miracle bean. The money will be in making something from soybeans, rather than
simply growing more and more of the crop.
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