It wasn't all that long ago that any Las Vegas bookie would have given you great odds for a U.S. victory in the competition for the global soybean market. Now, the odds are heavily weighted to a South American victory, and we may have ourselves at least partly to blame.

South America's rise to dominance in the soybean market can be traced back roughly 40 years to a time when the United States issued a ban on oilseed exports.

“It all began when President Nixon banned oilseed exports, and other countries went looking for an alternative supplier of soybeans,” says John Baize, international marketing specialist with John Baize and Associates in Washington, D.C.

For the first time ever, South America is expected to export more soybeans into the global market in 2002 than the United States. And, Baize says, the odds are that next year South America will pass the United States in annual soybean production because of expanded production acreage and very high yield averages.

“The United States used to be the big guy on the block and Brazil was the little kid. Now that little kid has grown up, and both Argentina and Brazil have become quite formidable opponents in the world market,” says Baize, who spoke at the Mississippi corn and soybean Agri-Day in Greenwood, Miss. recently. “There's a lot of land in Argentina that's in pasture that could go to soybean production if the economics are right. And, I'm afraid the economics are now right for that to happen. This is an area that doesn't freeze, gets 70 to 80 inches of rain every year, and can grow two crops year round.

He adds, “In the past, ending stocks numbers were used to determine the price of soybeans. Now a new soybean crop comes off every six months, and with just in time delivery, ending stocks no longer matter to the market.” The reason soybean prices aren't even lower than they are, Baize says, is because global consumption is continuing to rise. Global demand for soybeans, in fact, has more than doubled that of corn over the previous 10-year period, with soy consumption up an estimated 76 percent. That compares to a 30 percent increase in corn consumption, and a less than 10 percent increase in wheat and cotton consumption over the same time period. “The world market for these commodities is just not growing very fast,” he says.

Soybeans are also finding a home in the marketplace because they are priced to sell. Unfortunately for U.S. growers that price differs from country to country due to currency exchange rates.

“Brazil and Argentina are getting the equivalent of $9 per bushel instead of the $6 that U.S. producers are receiving on average, because of currency rates. The price of soybeans is going to get right for them before it gets right to you,” he says.

“What can we do about it? Nothing. Why is the dollar strong? Because the safest place in the world to invest money, according to many of those with money, is the United States.”

Further hampering U.S. competitiveness in the market is a higher per bushel cost of production. According to Baize, it costs the average U.S. soybean grower about $5.11 to produce one bushel of soybeans. In comparison, farmers in Argentina can produce one bushel of soybeans for about $3.92 and farmers in Brazil invest about $3.89 in each bushel of soybeans they produce.

These production costs include both variable and fixed costs. “A lot of factors are coming into play, but for the most part, the difference in production costs comes down to the price of land,” Baize says.

In addition to lower land costs, South American (Argentina) soybean growers do not pay a technology fee for seed, and they can save their transgenic seed. They may also be getting relatively cheaper equipment due to their proximity to John Deere's manufacturing facilities in Brazil.

Further complicating matters is the fact that 15 percent of Brazil's soybean production is illegally planted in Roundup Ready varieties. “It's time for U.S. growers to face the facts. Soybean producers in South America have learned everything they know from us, and now it may be time for us to take some lessons from them.

“We can't do anything about the strength of the U.S. dollar, or lower land prices in South America, but they are producing high yielding soybeans and they also have heat, weeds and insects to deal with,” Baize says.

According to USDA, “U.S. soybean and soybean product exports were about tied with Argentina and Brazil combined in 1990. However, USDA is projecting South American soybean exports will continue to grow to 80 million tons in the next decade, while the U.S. figure is expected to remain stagnant at about the 40 million-ton level.

“These are only estimates. I recommend taking those estimates with a grain of salt, but that's where USDA believes those numbers are now,” he says. “The stars are aligning and they're not aligning with you.”