steven sonka - books agronomy

19 Economics and MarketingSTEVEN T. SONKAUniversity of IllinoisUrbana, Illinois

KAREN L. BENDERUniversity of IllinoisUrbana, Illinois

DONNA K. FISHERGeorgia Southern UniversityStatesboro, Georgia

This chapter will describe todays marketplace for soybean [Glycine max (L.)Merr.] and examine key forces likely to shape the soybean marketplace of tomor-row. The description of todays marketplace includes global dimensions of pro-duction and utilization as well as the patterns that have emerged to lead to todayssetting. Looking to the future, there are many forces that will shape the future evo-lution of the soybean market. Two of these forces will be considered in detail withinthis chapter. One force is the future need for protein, in the context of future levelsof global population, income, and malnutrition. Another section examines pressuresfor change in the commodity marketing system. This approach has dominated, andcontinues to dominate, the soybean sector. However societal desires for more in-formation regarding production and marketing in the food system, in part fueledby concerns about genetic modification of agricultural products, coupled with ad-vances in information technology, combine to make it potentially feasible for al-ternative market systems to emerge and supplement or supplant the commodity ap-proach. If that change were to occur, it is likely to have ramifications throughoutthe supply value chain, including the research institutions that traditionally supportthat chain.

One of the most discussed changes in the soybean marketplace in the 1990swas the introduction and widespread adoption of transgenic soybean in the USAand Argentina. Introduced in the middle of the 1990s, Roundup Ready (MonsantoCo., St. Louis, MO) soybean cultivars increased to more than 71% of soybean pro-duction in the USA by 2001 (Monsanto, 2002). Globally, Roundup Ready soybeancultivars accounted for 63% of all transgenic crops grown (Monsanto, 2002). Al-though producers in general have welcomed these technological innovations, thesocietal response has been quite negative among some political interest groups. Theresulting controversy has intensified the pressure for fundamental change in agri-

919

Copyright 2004. American Society of Agronomy, Crop Science Society of America, Soil Science So-ciety of America, 677 S. Segoe Rd., Madison, WI 53711, USA. Soybeans: Improvement, Production,and Uses, 3rd ed, Agronomy Monograph no. 16.

Published 2004

cultural commodity systems. These issues will be examined in the section of thischapter that deals with the potential for alternative marketing systems.

191 THE SOYBEAN MARKETPLACE TODAYAND HOW WE GOT HERE

This section of the chapter will provide a brief review of the market per-formance of soybean globally over the last three decades or so. The primary vari-ables of interest will be consumption of soybean meal and oil, production (glob-ally and for key producing nations), trade, value, and prices.

191.1 Using the Soybean Crop

Since the 1970s, the global economy performed admirably as people in manyparts of the world shared in the increased abundance fueled by globalization (TheEconomist, 2001). As income levels increased in Asia, Mexico, Latin America, andother nations, consumers chose to enhance their diet by consuming greater quan-tities of animal protein and fats and oils. The soybean crop, and those farmers aroundthe world who produced it, played a key role by providing the protein for livestockfeed and soybean oil for human consumption. In 1999, soybean oil comprised nearly30% of the global consumption of vegetable oils (Soy Stats, 2002). Even more im-pressive, soybean meal accounted for almost 70% of the worlds protein meal pro-duction in that year (Soy Stats, 2002).

Despite considerable interest and expenditures, industrial uses of soybeanproducts, including use as alternative fuels, remain speculative and small. In theUSA, for example, soybean meal production exceeded 34 metric tonnes and soy-bean oil production exceeded 8 metric tonnes in 1999 (Soy Stats, 2002). Industrialuses, in total, were

Food and Drug Administration (FDA) approval of a health claim for soybean link-ing soybean consumption to the potential for reducing cholesterol levels (U.S. SoyFoods Directory, 2002). Interest in the use of soy-based products in soymilk, bakedgoods, cereals, and pastas has greatly intensified. Although growth in the con-sumption of such products has been sparked in recent years, the total quantity ofsoybean utilized in these products remains relatively small.

Soybean meal has held and continues to hold a commanding position rela-tive to other sources of meal for protein. Soybean oil, on the other hand, has beensubjected to considerable pressure from alternative sources of vegetable oil in re-cent years. Canola oil and olive oil are two competitors that appeal to some healthsegments of the market. From a volume perspective, however, the massive in-crease in palm oil production and use is particularly noteworthy. At nearly 22 met-ric tonnes in 2000, palm oil production was almost 15 times greater than it was in1961 (FAO of the United Nations, 2002).

191.2 Soybean Production and Exports

Figure 191 presents production data for soybean globally and in the USAsince 1970. Starting at slightly more than 43 metric tonnes in 1970, global productionincreased nearly fourfold, first exceeding 160 metric tonnes in 1998 (FAO UnitedNations, 2002). The 1970s were a period of rapid increase, with global soybean pro-duction doubling. The 1980s saw a much slower rate of increase, with average pro-duction in the years 1989 to 1991 only 30% higher than at the start of that decade.During the 1990s, however, production leaped upward again. The 160 metrictonnes level now being achieved is 50% greater than the level attained at the startof the 1990s.

In the USA, production in 1970 was nearly 31 metric tonnes, accounting foralmost three-fourths of world production. Although production in the USA morethan doubled since the 1970s, achieving in excess of 75 metric tonnes in 2000, theUSA now accounts for less than half of global soybean production. As was the caseglobally, production jumped sharply during the 1970s, exceeding 50 metric tonnesfor the first time in 1978. Production in the USA also stagnated in the 1980s and

ECONOMICS AND MARKETING 921

Fig. 191. World and U.S. soybean production: 1970 to 2001.

for much of the early 1990s. Since 1994, production increased substantially. Priorto 1994, production in the USA hovered in the 50 to 60 metric tonnes range. Be-cause of good weather, enhanced technology and management, and domestic farmincome support policies, production in the USA has jumped to levels well above70 metric tonnes.

Figure 192 provides data on soybean production levels for the top five pro-ducing nations. The data for the USA are the same as that shown in Fig. 191. China,which started the 1970s as the second largest producing nation, now is fourth in totalproduction. Although production has increased by more than 80% in China, pro-duction increases in Brazil and Argentina far outpaced those levels. Production lev-els in both Brazil and Argentina were inconsequential in 1970 (1.5 and 0.1 metrictonnes, respectively). By the late 1990s, production in those two nations exceeded50 metric tonnes (32.7 million in Brazil and 20.2 million in Argentina in 2000).India, which produced only a few thousand metric tonnes in the 1970s, attained pro-duction levels in excess of 5 metric tonnes by the end of the 1990s.

Fueled by global economic growth, this massive increase in production hasbeen employed to provide soybean meal for livestock feed and soybean oil for con-sumers. The global increase in exports documents a significant component of thisincrease in need. Global soybean exports increased over threefold between 1970and 1999 (Fig. 193). Exports from the USA, followed the global upward patternfrom 1970 to the early 1980s. Then, however, the pace of increase slowed sub-stantially in both absolute terms and relative to global exports. The early 1990s sawa significant uptick in exports from the USA, however, since 1996 export growthhas stagnated. A strong U.S. dollar, increased production in other nations, and con-cerns regarding transgenic soybean are all rationales that could contribute to ex-plaining these trends.

Table 191 identifies the top five importing countries for U.S. soybean in 1990and 2000. The European Union, Japan, Taiwan, and Mexico are on this list for bothyears, although the quantities imported have slipped for all but Mexico. The intro-duction of China, at a level exceeding one billion dollars in soybean imports, is adynamic of considerable interest.

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Fig. 192. Soybean production in the five largest producing nations: 1970 to 2001.

Figure 194 provides information, not just on the value of soybean exports,but also on the value of soybean meal and oil exports. Although not as widely dis-cussed, the value of soybean meal and oil exports is a substantial component of theinternational revenue stream for the U.S. soybean industry. For the 1997 to 1999period, the value of soybean exports exceeded $5.6 billion. During this same 3-yr


Fig. 193. World and U.S. exports of soybean: 1970 to 1999.

Table 191. Top five customers for U.S. soybean (1990 vs. 2000).

1990 2000

(Million $s) (Million $s)

European Union 1433 European Union 1143Japan 821 China 1008Taiwan 411 Japan 758Mexico 200 Mexico 678South Korea 194 Taiwan 385

Fig. 194. Value of U.S. exports: 1970 to 1999.

period, the combined value of the exports of soybean meal and oil exceeded $2.1billion dollars.

Figure 195 describes the total annual value of the U.S. soybean crop from1970 to 1999 (Soy Stats, 2002). The rapid drop in crop value since 1996 documentsthe current economic stress of U.S. soybean farmers. These data do not include thedirect financial impact of domestic farm policies which have mitigated, to a largeextent, the negative effects of low prices on net income of soybean farmers. Farmprogram policies, especially the ratio of the soybean to corn (Zea mays L.) loan ratesin the 1996 legislation, influenced the amount and location of soybean productionin the USA. That ratio appears to have fostered increases in soybean hectares rel-ative to other crops. The volatility of crop revenues also is documented in Fig. 195.Soybean revenues saw two periods of rapid increase. One was in the first half ofthe 1970s and the second was in the mid-1990s. Unfortunately both those periodsof increased revenue were not sustained.

Figure 196 presents data on the farm price received by U.S. farmers for soy-bean from 1974 to 1999 (Soy Stats, 2002). These are in nominal, not real, terms.

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Fig. 195. Value of U.S. soybean crop: 1974 to 1999.

Fig. 196. Farm price of U.S. soybean: 1970 to 1999.

Since 1975, soybean prices oscillated around the $6 per bushel level. Recent prices,however, are substantially below that level.

191.3 Summing Up

As a major agricultural commodity, the growth in soybean consumption andproduction has been noteworthy. In general, the last decades of the 20th century sawunprecedented growth in economic well-being. As lower and middle-income con-sumers experience a gain in income, a traditional response is to upgrade their dietstatus. Soybean oil and animal protein fed with soybean meal are important vehi-cles which allow consumers to translate their income gains into enhanced diets.

In the 1970s, production increases were heavily tied to North America. How-ever, in the 1980s and 1990s, production increases in other parts of the world, no-tably Brazil and Argentina, acted to greatly extend the geographic reach of signif-icant soybean production. The continuing global need for soybean and soybeanproducts is demonstrated by the sharply increasing levels of soybean exports thatoccurred over the last 30 yr.

192 THE DYNAMICS OF TOMORROWS GLOBALAPPETITE FOR PROTEIN

One of the key issues facing agricultural producers in general, and the soy-bean industry in particular, is uncertainty regarding the future need for protein and,therefore, for soybean. To address this concern, the National Soybean Research Lab-oratory (NSRL) developed a system dynamics model to explore the potential ap-petite for protein in the world food system. The Protein Consumption Dynamics(PCD) Model simulates future global protein appetite scenarios based on popula-tion and income growth, highlighting the systematic relationships between popu-lation, income, appetite (potential demand), and malnutrition (Fisher, 2000)1. Ittracks the human appetite for six agricultural commodities (beef, pork, poultry, fish,fats and oils, and vegetable protein), on a global basis, for each year from 2001 to2025. The model also provides estimates of the extent of malnutrition for the sametime period.

192.1 Model Structure

Figure 197 illustrates the relationships made explicit in the Protein Con-sumption Dynamics (PCD) Model. In the model, a regions income and populationincrease each year at specified rates. The effects of cultures and dietary preferencesare reflected in the regionally-specific econometric estimates between income andfood appetite. The effects of per capita income and cultural influences are combinedto develop estimates of appetite (potential demand or consumption) and malnutri-


1 Model development was funded in part by the Illinois Soybean Program Operating Board, the Soy-bean Industry Chair in Agriculture Strategy, and other supporters of the National Soybean Research Lab-oratory.

tion for each region. These per capita estimates are then multiplied by the appro-priate population estimates for each region to compute total potential demand forthe various commodities.

Cultural differences are incorporated through the designation of eight de-mographic regions. The regions are defined to be relatively homogeneous in termsof income, income growth levels, food appetite patterns, and cultural characteris-tics. These regions, which are consistent with those identified by both the WorldBank and the U.N. FAO, are delineated in Table 192.

A key reason for the development of this model was to have the capability tocompare the effects of alternative assumptions on the desire and need for proteinacross a range of parameter values. To illustrate this capability, two future scenar-ios are defined.2 These are:

Base Case: Employs population growth projections consistent with WorldBank and U.N. FAO medium-level projections and income growth projec-tions consistent with the actual experience of the last two decades.

Lower Income Case: Uses the same population projections as the Base Case,but income growth rates are 50% smaller than those of the Base Case.

The model framework requires that future income and population growth beprojected for each region. Population and income growth information are based onsecondary data taken from the World Bank and the FAO. The historic consumptiondata are taken from the 1997 FAOSTAT Statistical Database. Historic and futuremalnutrition data are taken from FAO and Bread for the World (BFW, 1998).3 It isdifficult to find long-term income growth rate projections from official sources. The

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Fig. 197. Relationships underlying the protein consumption dynamics model.

2 These scenarios are projections as defined by Ferris (1998). For our purposes, the probability ofeach scenario occurring is not important. We are more concerned with getting decision makers to con-sider alternative potential futures, than in predicting the future.

3 More information on malnutrition can be found at: http://www.fao.org/NEWS/1999/991004-e.htm.

income projections employed here (in Table 193) are based upon historic rates ofincome growth, published literature on future prospects (Coplin and OLeary,1994), and expert judgment.

192.2 Future Needs and the Role of Income

This subsection describes the modeling results provided by the PCD model.The information provided here is only a small subset of data that the modeling toolcan provide. A more complete analysis is available in Fisher (2000). For the BaseCase Scenario, Fig. 198 and 199 present estimates of regional population and percapita income for the Years 2001 through 2025. Although the numbers have pro-found implications for many measures of human well being, the estimates are likelynot too surprising in themselves. Population growth is relatively low in the OECDregion (the relatively economically well-off nations of Europe, North America, Aus-tralia, New Zealand, and Japan) and the Transition Economies, roughly 5% for bothregions. Conversely, Fig. 198 shows relatively high population growth in theMENA and Sub-Saharan Africa regions; an increase of more than 50% in popula-tion for both.

Based upon these assumptions, very strong per capita income growth wouldoccur in China (585%), East Asia (209%), and South Asia (163%) (Fig. 199). Datafor the OECD region is not included in Fig. 199 because of scaling difficulties.Income growth in the OECD countries is roughly equal to the global average but,of course, starts at a very large initial level. Growth in total gross domestic prod-uct (GDP) is weak in the regions with high population growth. The result is a de-


Table 192. Protein consumption dynamics (PCD) regional definitions.

ChinaEast Asia Transition economies (the countries of the former USSR, Eastern Europe, and Turkey) Latin AmericaMiddle East and North Africa (MENA)OECD (The relatively economically well-off nations of Europe, North America, Australia,

New Zealand, and Japan)South AsiaSub-Saharan Africa

Table 193. Annual income growth rates.

Regions Historic Base case Lower income

%

China 10.20 9.00 4.50East Asia 7.00 6.00 3.00Transition economies 0.50 1.60 0.80Latin America 2.20 2.20 1.10MENA 1.40 1.00 0.50OECD 2.60 2.60 1.30South Asia 5.60 5.40 2.70Sub-Saharan Africa 1.50 2.00 1.00World 3.40 3.70 1.90

Historic annual income growth rates are averages from 1984 to 1996.

cline in per capita income for the Sub-Saharan Africa and MENA regions, 3% and17%, respectively.

Table 194 indicates how the forces shown in Fig. 198 and 199 could im-pact the appetite for animal protein, fish, and vegetable protein. Globally, the ap-petite for animal protein increases by 81%, fish by 86%, and vegetable protein by

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Fig. 198. Population growth. Base case 2001 to 2025.

Fig. 199. Per capita income growth. Base case 2001 to 2025.

38%. China, East Asia, and South Asia show large increases in the appetite for an-imal protein, 146%, 213%, and 745% respectively. Growth in the OECD is rela-tively modest, 7% for animal protein, 1% for fish, and 17% for vegetable pro-tein. This reflects the fact that people in the OECD countries, in general, will notdevote a significant portion of any additional income to expenditures for food. Itshould be noted, however, that even though the OECD had the smallest level ofchange in the appetite for animal protein, the region still accounts for nearly 20%of the total appetite (Fisher, 2000).

Over the last three decades, both the number and the proportion of the globesundernourished population have declined. Table 195 indicates that at the globallevel, continuation of this trend is possible, given the population and income pa-rameters shown in Fig. 198 and 199. Unfortunately this relatively positive resultat the global level masks serious regional problems, especially in the Sub-SaharanAfrica and MENA regions, which would experience increases in the number mal-nourished of 78 and 97%, respectively. By the Year 2025, Sub-Saharan Africa wouldaccount for 56% of the worlds malnourished.

For the Lower Income Scenario, the annual income growth rates are reducedby 50% from their level in the Base Case Scenario. The result is less income spreadacross the same number of people as in the Base Case Scenario. Figures 1910,1911, and 1912 compare the estimated appetite for the various commodities (an-


Table 194. Base case scenario: Animal protein, fish, and vegetable protein consumption (20012025).

Animal protein Fish Vegetable protein

Region 2001 2025 Change 2001 2025 Change 2001 2025 Change

million metric % million metric % million metric %tonnes tonnes tonnes

China 46.1 113.7 146 18.3 49.8 172 5.9 9.3 57East Asia 9.9 31.0 213 11.3 23.3 107 5.7 8.2 44Trans. econ. 21.9 27.3 24 4.7 6.0 28 2.1 2.6 23Lat. America 24.8 35.7 44 4.8 7.4 54 6.1 7.8 28MENA 5.1 6.5 27 1.8 2.3 27 3.1 4.9 58OECD 73.7 79.1 7 29.6 29.2 -1 8.9 7.4 17South Asia 5.4 45.7 745 6.6 27.1 310 17.2 24.6 43SS Africa 6.3 10.4 64 6.7 10.9 63 9.5 15.9 67World 193.3 349.3 81 83.8 156.0 86 58.6 80.7 38

Table 195. Base case scenario: Human malnutrition (20012025).

Base case Number undernourished Proportion undernourished

Region 2001 2025 Change 2001 2025 Change

no. 106 % no. 106 %

China 182.3 9.7 95 0.15 0.01 93East Asia 78.2 34.9 55 0.15 0.05 67Lat. America 63.4 69.0 9 0.13 0.11 15MENA 25.6 50.5 97 0.09 0.11 22South Asia 275.2 134.2 51 0.22 0.08 64SS Africa 211.6 375.9 78 0.35 0.36 3World 836.4 674.2 19 0.14 0.09 37

imal protein, fish, and vegetable protein, respectively) between scenarios. Each fig-ure shows the appetite for a given commodity for the Base Case and the Lower In-come scenarios in the Year 2025.

The Transition Economies, Latin America, MENA, and Sub-Saharan Africaregions all show little variation in the appetite for animal protein between the twoscenarios. In contrast, the appetite for animal protein in the other regions is moreaffected by the reduced income. The strong relationship between income and ap-petite patterns is evidenced by the sharp decline in animal protein appetite for theAsian regions of China, East Asia, and South Asia in the Lower Income Scenario.The appetite for fish exhibits similar patterns, as seen in Fig. 1911.

Cultural differences influence the appetite for vegetable protein between re-gions (Fig. 1912). In the Lower Income Scenario, the appetite for vegetable pro-tein increases slightly in Latin America, MENA, OECD, and Sub-Saharan Africaindicating a substitution of vegetable for animal protein.

Finally we turn to the comparison of malnutrition results between the sce-narios. Income and population have a strong influence on malnutrition (Fig. 1913).The decrease in income associated with the Lower Income Scenario brings aboutstartling increases in malnutrition in all six regions. Sub-Saharan Africa accountsfor more than a third of the worlds malnutrition, with more than 350 million peo-ple underfed, even in the Base Case Scenario. With lower income growth, in-creases in the number of malnourished are exhibited in all regions. South Asia is aregion that is particularly sensitive to income growth, as malnutrition would increaseby more than 100 million people in the Lower Income vs. Base Case scenarios. Thenumber of malnourished exceeds 400 million people in Sub-Sahara Africa underthe assumptions of the Lower Income Scenario.

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Fig. 1910. Scenario comparisons for animal protein appetite in the Year 2025.

192.3 Future Agricultural Productivity and Innovation: Who Cares?

Abundant, low cost, safe food supplies are the ultimate product of agricul-tural productivity and innovation. However, it often is difficult for citizens and pub-lic policy makers to see and appreciate the linkage between food in grocery storesand the need for innovations from agricultural research. Indeed, for the last 5 yr cit-izens of the developed world have benefited from past agricultural research and fa-vorable growing conditions through unusually abundant food supplies. Unfortu-nately, that abundance reduces the publics willingness to financially support thecontinual efforts needed for agricultural research innovation. Therefore we under-took to use some recently developed modeling capabilities to explore the notion ofagricultural productivity and potential future costs of constraining agricultural pro-ductivity.

In the PCD framework, food availability is primarily reflected through thelevel of food prices. Extending the work just described, weve defined a third sce-nario, the Food Price Inflation Case:

Food Price Inflation Case: For the years, 2006 to 2015, commodity foodprices follow the annual inflationary pattern that existed during the decadeof the 1970s. Before and after those years, prices for food commodities areconstant in nominal terms as in the first run.


Fig. 1911. Scenario comparisons for fish appetite in the Year 2025.

The Base Case scenario, described previously, is the comparison setting. In that sit-uation, future prices for food commodities are held constant in nominal terms (de-clining in real terms). This stipulation is consistent with the actual experience ofthe last two decades for numerous agricultural commodities (Fig. 196).

Table 196 provides key results for selected years. To summarize these ef-fects, estimates for one variable, the number of people malnourished, are shown forthe three key regions of China, South Asia, and Sub-Saharan Africa. With constantfood prices (and future world economic growth consistent with that of the last twodecades of the 1900s and moderate population growth in the future), malnutritionlevels would decline dramatically from their current levels in China and South Asia.In Sub-Saharan Africa, however, even constant food prices are not sufficient to keepmalnutrition levels from increasing, as population growth would swamp incomegrowth.

The analysis examines the effect of just 10 yr of food inflation, starting in theYear 2006 (but using the same population and economic growth assumptions as pre-viously). If food inflation rates follow those that actually occurred during thedecade of the 1970s, malnutrition levels skyrocket. In 2015, the year of peak mal-nutrition for the three regions, more than 960 million additional people, just in thesethree regions, would suffer malnutrition because of the lack of agricultural pro-ductivity. This analysis assumes that food prices stay constant after 2015. Despitethat, the number of malnourished would be more than 700 million greater in theYear 2025 than in the scenario with no food price inflation.

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Fig. 1912. Scenario comparisons for vegetable protein appetite in the Year 2025.

As citizens and public policy makers evaluate biotechnology and other agri-cultural research innovations, it is critically important to understand that restrain-ing agricultural innovation is not a risk-free decision. The cost of overly restraininginnovation could be hundreds of millions of additional hungry people. The resultsof this analysis document the stark and dramatic effect of the lack of agriculturalresearch innovation on the well being of the worlds poor.

192.4 Summing Up

The PCD model tracks annual estimated human appetite (potential demand)from 2001 to 2025, for six agricultural commodities (beef, fish, pork, poultry, fatsand oils, and vegetable protein) in eight regions that encompass the world. Four keyimplications emerge from analysis of the PCD simulation results. These implica-tions form the basis for further strategic discussion.

1. There is an important disconnect between some of the industrys keyskills and capabilities and those it will need in the future. The industrysgrowth since 1975 occurred mainly in the OECD region. Therefore the in-


Fig. 1913. Scenario comparisons for number malnourished in the Year 2025.

Table 196. Estimates of the number of malnourished humans with constant vs. inflating food prices.

2025 with 2015 with food 2025 with foodArea Current constant prices price inflation price inflation

no. of people

China 182 000 000 11 000 000 432 000 000 201 000 000South Asia 275 000 000 143 000 000 574 000 000 469 000 000Sub-Saharan Africa 211 000 000 376 000 000 502 000 000 601 000 000

dustrys marketing and policy expertise, as well as its research direction,are heavily focused on the needs of customers in those regions. However,although likely to still be significant, that region is unlikely to be the sourceof significant volume growth in the future. With strong income growth, theindicated appetite for animal protein (particularly in the China, East Asia,and South Asia regions) surges. Therefore new skills and capabilities areneeded to serve the potential growth markets of the world.

2. Projected growth in appetite is relatively robust with respect to populationgrowth but is more sensitive to income growth. The market need for pro-tein declines significantly between the Base Case and the Lower IncomeCase. Global economic growth is one of the key strategic issues for the soy-bean sector.

3. Even with optimistic income growth, malnutrition in the Sub-SaharanAfrica and MENA regions persist at frightening levels. With lower incomegrowth, malnutrition intensifies in other areas of the world as well. There-fore, humanitarian need for food is likely to be a fixture of the next 25 yr.Historically, the soybean protein complex has not been a significant com-ponent of humanitarian food responses. For moral and business reasons,strategies that heighten the industrys role in humanitarian responses war-rant careful consideration.

4. Long-time lags typically exist between investment in research and the re-sulting gains in agricultural productivity. In times of abundance, such asthe world has experienced in the last few years, it is natural for citizensand decision makers to underappreciate the need for continual investmentin agricultural research. The analysis of the effects of potential food priceinflation (the markets signal of a productivity shortfall) vividly documentsthat the impact of inadequate productivity falls upon the poorest of theworlds population.

193 WILL TOMORROWS MARKETPLACE BE DOMINATED BYTODAYS COMMODITY MARKET APPROACH?

The second of two forces shaping the future evolution of the soybean mar-ket is the pressure for change in the commodity marketing system. Two primarydistribution systems exist for soybean in commercial agricultural systems. One dis-tribution system is focused on commodity crops, where the emphasis is on homo-geneity. The other distribution system is focused on high-value traits, but has beenutilized primarily for very small volumes. The problem with these two primary dis-tribution systems is that neither channel can cost effectively supply the new dif-ferentiated value-enhanced crops. It is expected that many of the new value-addedcrops will be produced in larger volumes, relative to the high-value trait crops. Withthe growing attention placed on biotechnology and value-added crops, there is agrowing need for market channels that will allow distribution of a product that isidentity-preserved (Sonka et.al., 2000).

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193.1 The Structure of Todays Marketplace

Homogeneity is a fundamental attribute that has permeated the traditional soy-bean supply chain. In the commodity value chain, farmers produce generic soybeancrops, all of which are viewed the same, although produced from a choice amonghundreds of cultivars. After harvest, farmers deliver their grains to a first-handleror store them on-farm for later delivery. Whether delivered at harvest or from stor-age, the first handler receiving the crops is not interested in differentiating thesegrains for different end-uses, but is interested in blending grains to meet physicallimits for numerical grades in outbound shipments.

This commodity orientation has important implications. First the capabilityto coordinate a large and diverse sector such as agriculture with minimal informa-tion flow throughout the sector has been a major strength of the sector. Althoughcommodity output meets the general specifications of the customer at the next level,it may not optimally meet the specific needs of any one customer. The associatedloss of efficiency at the customer level is offset by the considerable flexibility ofsupply offered by the commodity system and its low cost. This is one reason thatcommodity agriculture has been successful. However, one side effect of this struc-ture is that knowledge creation tends to be concentrated within each segment in thechain rather than disseminated throughout the chain.

For domestic purposes, almost all soybean is traded as U.S. no. 1 soybean,while export specification is almost entirely U.S. no. 2 soybean. In general, the soy-bean is transported to soybean processors who crush (mill) the soybean into twocomponents: soybean oil and soybean meal. Soybean oil is then sold to food andindustrial users, while soybean meal is used in feed rations for livestock. More re-fined protein products can be created for human consumption.

The handlers in the traditional soybean supply chain typically have large vol-ume storage units, and their profit is created by turning over a very large quantityof soybean at very small margins. Because soybean is treated as a homogeneousproduct, large volume storage units are very efficient and commingling of a mul-titude of soybean cultivars does not influence the price received for transshippedsoybean. Similarly, soybean processors crush large volumes of homogeneous soy-bean, with an objective of maximizing yield of oil and meal. There are two com-mercial types of soybean meal that can be produced: low protein meal which con-tains a minimum of 43.5% protein and high protein meal which contains a minimumof 47.5% protein. Most soybean received at the processing facility can be crushedas they arrive or blended with stored soybean to produce either level of meal, sodifferentiation before arrival based on protein content is not required.

This traditional supply chain for soybean, emphasizing homogeneity, has beenin place since the production of soybean in the USA began in earnest in the 1960s.In this supply chain, much of the domestic and all of the international trade are basedon specific tests that determine numerical grade. For soybean, there are four nu-merical grades established, and each grade is assigned a minimum test weight, andmaximum levels of heat damaged kernels, total damaged kernels, foreign materi-als, splits, and soybean seeds of other colors (U.S. Congress, 1989). The pricing ofgrains and oilseeds is dependent on these numerical grades. For example, the con-


tract specification for soybean futures traded at the Chicago Board of Trade indi-cates that the deliverable grade is U.S. #2. There are appeal mechanisms in placeif there are disagreements about quality delivered, and even if a lower grade is re-ceived than contracted for, the characteristics that are part of the grade factors oftenhave little relationship to the grain characteristics that determine value to the enduser. The emphasis on homogeneity drives the system toward average quality, andthus limits the opportunity to match the level of specific attributes available in dif-ferent crop lots to the needs of different buyers.

An alternate supply chain exists in parallel to the homogeneous commoditymarket and is used for some differentiation of soybean, particularly in markets fortofu and organic soybean. A key differentiating feature of this system is that deci-sion making is administratively coordinated rather than being coordinated prima-rily through market price signals as is the case within the commodity market. Forexample, administrative coordination could result in increased consumer demandfor a differentiated chicken product for Easter, even though the overall market sig-nals for generic chicken suggest that demand is falling. Historically, it has been muchmore difficult and expensive to coordinate identity preserved systems, therefore theportion of the crop marketed within this system has been relatively small. Furthera value chain optimized to use very specific farm output incurs the risk of restrictedflexibility. Because of the biologic variability inherent in agricultural production,output levels can fluctuate both substantially and unpredictably. Substitution in anoptimized system (if the optimal farm-level output is not available in sufficient sup-ply) has been costly, further restraining the use of such optimized systems.

The identity-preserved supply chain typically consists of a specialty grain firmcontracting cultivar-specific soybean production with farmers, with particular pro-duction and management requirements as contract terms. The farmer stores this pro-duction on farm, and either delivers it directly for loading onto a container for ex-port shipment, delivers directly to the tofu processor, or delivers for direct loadingonto trains for domestic shipment. In any of these cases, the goal is to minimize thenumber of handlings so as to reduce quality deterioration and to minimize the po-tential for commingling with nondifferentiated soybean. Generally, the identity-pre-served system is focused on small-scale lots of high-valued soybean whose addedvalue (compared to commodity soybean) is greater than the additional costs of pro-duction, handling, and segregation.

Table 197 lists the relative strengths and weakness of the commodity vs. iden-tity preserved systems. Until relatively recently, the food marketing sectors werecomfortable with the need to choose between these two relatively different ap-proaches. However, societal events are pulling and technological changes are push-ing our food systems to move to a differing set of alternatives. The general desires

936 SONKA ET AL.

Table 197. Marketing system characteristics.

Commodity Identify preserved Societal objectives

Large volumes Small volumes Large volumesLow cost Higher cost Low costMinimal quality standards Specific quality standards Specific quality standardsPurchaser flexibility Minimal flexibility Purchaser flexibility

of the market are listed in the third column of Table 197. It is intriguing that thisset of desires is inconsistent with both of the traditional alternatives.

193.2 Market and Social Forces for Change

There are many forces, which independently and combined, are putting pres-sure on the traditional production and marketing practices in agriculture. Increas-ing consumer sophistication, technological change, competition, environmental con-cerns, and biotechnology are some of the factors that are influencing todaysagricultural marketplace. Whether the confluence of these factors will permanentlyand significantly alter the structure of U.S. agriculture, or will result only in incre-mental changes has not yet been determined. How each of these forces may influ-ence commodity agriculture is discussed below.

Consumer sophistication has resulted in interest in foods that go beyond tra-ditional concerns of price and presentation. The enhanced consumer interest pri-marily involves three aspects of the foods they eat; food safety, health issues, andperceptions associated with particular production practices. Consumers want as-surance that the foods they eat are safe. Although the commodity market structurehas, in the main, supplied safe foods to consumers, this market structure does notprovide consumers information on the production, handling, and processing activ-ities that occurred during the transformation of raw crops into finished consumergoods. Information on production activities on individual grain lots is lost when theselots are commingled with other grain lots. Recent concerns of bioterrorism andagroterrorism potentially could put additional pressure on the commodity marketstructure, if these concerns lead to emphases on tracking and traceability of rawgrains as they are produced and transformed into products.

Consumers also have expressed interest in foods that improve their health,such as products which lower cholesterol or which may reduce their risk of certaincancers. Some consumers are willing to pay for foods with certain production char-acteristics, such as organic foods, regardless of whether these foods are actually moresafe than what it generally available. The ability to supply either the attributesthat provide the health or nutritional component, or provide the information on pro-duction practices, requires an identity-preserved market channel.

Technological innovation also has contributed to the pressure to initiate al-ternative market channels. New measurement technologies allow for identificationof specific attributes in grains that can be rapidly measured at first delivery, includingoil and protein in soybean. Improved processing technologies enable the refinementor capture of desirable attributes, such as isoflavones in soybean. In both cases, soy-bean with that attribute may need to be segregated throughout the market channelto retain their value. Developments in information technology may soon providethe capability to efficiently capture by electronic means the relevant activities re-lated to the production, handling, and processing of identity-preserved crops, andto deliver this information in a timely manner to end-users.

Another force for change is increased competition from South America. Theprimary U.S. competitor in the global soybean market is Brazil, although soybeanproduction has grown in many South American countries, such as Argentina,Paraguay, and Uruguay. Historically, infrastructure impediments and higher trans-


portation costs have been a competitive disadvantage for Brazilian producers. Ef-forts to improve road and river transportation, if successful, could enhance Brazilscompetitive position. Similar efforts to substantially enhance Brazils informationand coordination infrastructure might allow that system to respond more effectivelyto pressures to change away from reliance on the traditional commodity approach.

Societal concerns regarding the impact of agricultural practices on the envi-ronment also may influence whether alternative market channels will develop forsoybean. Desires for reduced use of fertilizer and chemical inputs have led to newproduction practices based on precision agriculture, where the quantity of inputsapplied to a given area of land is matched to the productivity needs of that land (Na-tional Research Council, 1997). One result of precision agriculture is that moreknowledge is created about each land unit, and information is recorded regardingthe timing, quantities, and location of input applications, as well as information onyields during harvest. While the emergence of precision agriculture practices wasdriven primarily to increase profitability for producers, this data also could be usedin identity-preserved systems to verify when and where specific production and har-vest activities took place. It might be anticipated that the linkage of this informa-tion with value-added soybean might first occur in the high value-added identitypreserved system currently in place. However, if the number of producers embracingprecision agricultural activities increases, the information collected also mightcontribute to the development of alternative identity-preserved market channels(Sonka et.al., 1999).

The application of biotechnology to agriculture also may profoundly changethe reliance on commodity marketing channels. To date, biotechnology has beenfocused on developing soybean with transgenic input traits, such as resistance toherbicides or insects. The incorporation of these traits into soybean has no knowneffect on the end-use characteristics of soybean, such as their protein and oil lev-els, or processing values. Although it was anticipated that the first generation trans-genic soybean, that is, soybean modified with input traits, would be marketedusing the traditional commodity supply chain, the international trade environmentfor transgenic soybean has become much more complex. In fact, today the com-modity marketing channel is not a sufficient supply chain for all international mar-kets.

The next generation of genetic modification is focused on output traits thatare intended to alter end-use characteristics to make soybean products healthier, suchas modified oils. Identity-preserved supply chains, which differ from either of theexisting primary systems, will be required to maintain the value of these modifiedsoybean cultivars throughout the marketing channel. The next section will presenta model of the social construction of alternative market channels.

194 THE SOCIAL CONSTRUCTION OF ALTERNATIVE MARKETS

An initial consideration of how rapidly commodity market channels willchange to identity-preserved market channels frequently focuses on only the addi-tional costs incurred in segregating and handling value-added goods vs. com-modities. If the development of identity-preserved market channels were depend-

938 SONKA ET AL.

ent solely on the sum of these additional costs, then it would be a fairly simple ex-ercise to determine under what scenarios identity-preserved channels would develop.However, although costs are clearly a factor in the development of identity-preservedmarket channels, reliance on only costs will not help us realistically anticipate thepotential for change. This section will introduce and describe a social constructionmodel that incorporates a richer set of parameters necessary to better understandthe array of possible outcomes for commodity markets, and the social groups thatmay influence the final outcome.

The application of biotechnology to soybean was expected to increase thevalue of the crop to growers and processors, through the development of soybeancultivars with preferred agronomic characteristics and intrinsic product attributes.For example, Roundup Ready soybean was developed to allow the producer to useRoundup herbicide to kill a broad spectrum of weeds effectively and at lower totalcost without destroying the soybean plant itself. This type of application is referredto as an input or agronomic trait, since it impacts the producers use of inputs suchas herbicides or pesticides. The second application of biotechnology is the alter-ation of output traits, where the chemical components of soybean, such as oil, pro-tein or fatty acids, are altered to make the soybean more valuable in various end-uses.

Input trait biotechnologies arrived to market first. This was seen by holdersof biotechnology patents, ex ante, as an important element of the rollout of biotech-nologies. Transgenic input traits did not affect the use value (in processing or con-sumption) of the product since its nutritive attributes remained the same. Produc-ers would adopt the transgenic crop for economic reasons, perhaps, with positiveenvironmental impacts. New output traits would follow as the technology devel-oped, after the marketbuyers and sellershad become accustomed to the tech-nology through the use of seeds with the altered input traits.

Traditional supply chains were envisioned for distribution of input trait-transgenic soybean, since these soybean do not affect value to the end-user and there-fore are not physically differentiable from nontransgenic cultivars. However, withthe recent development of international concerns about the basic technologies oftransgenic crops (particularly in Europe, but also extending to Japan and other coun-tries), some or all types of transgenic soybean may need to be segregated from non-transgenic soybean.

The short-term impact of this international resistance to transgenic modifi-cation is primarily confusion across the soybean marketplace. In this setting, firmsmust identify which of their customers require nontransgenic soybean, identify howthe soybean can be segregated throughout the supply chain, and evaluate whetherexisting testing technologies can ascertain if the soybean they receive is transgenic.There are many unresolved issues in the transactions between firms in the produc-tion and marketing of soybean. In the long-run, will agronomic trait-transgenic soy-bean be marketed in the same market as nontransgenic soybean? Will the marketsbe distinct despite the fact the soybean is homologous in processing? Will there bedistinct, separate markets for output trait-transgenic soybean, or will there be somesimpler aggregate market where all attribute combinations for soybean will be treatedin common? At a practical, immediate level, these uncertainties have profound eco-nomic consequences for buyers and sellers in the supply chain. Will nontransgenic


soybean command a price premium? What is the liability for delivering contami-nated (mixed) loads and can one be insured against this liability? How will tech-nologies for sampling and testing, segregation requirements, and labeling be in-troduced into the marketas mandatory or voluntary programs?

The longer-term impact from consumer and political resistance to transgenicsoybean is by no means apparent today. Whether or not the international resistanceto transgenic soybean continues for years to come, is mitigated by some form ofbilateral agreements or World Trade Organization (WTO) negotiations, or fades be-cause of diminished interest, currently is not known. Likewise, the U.S. consumerslonger-term reaction to genetic modification in the food supply is uncertain.

194.2 The Market Construction Process

The question of whether the dominant marketing system for the heretoforehomogeneous soybean can accommodate transgenic soybean, whether it musteventually be replaced by a plethora of smaller markets that bear some resemblanceto the small-volume identity-preserved markets that now exist, or whether a con-tinuum of market channels will be developed will eventually be answered in the mar-ketplace. What the answer will be, and the path that leads to that answer, will beconstructed as we watch. However, as White (1981) warns, Building a marketis a conflict-ridden and erratic process with quite a range of outcomes possible inthe form of market schedules (p. 520).

As White suggests, the construction of a new market such as the one (or sev-eral) in which transgenic soybean will change hands is an uncertain process. How-ever, we must remember that all markets are social constructions, even the marketsthat we now take for granted. These are markets where products are well defined,as are the buyers and sellers; thus, the market boundary is fixed. Today, we routinelyspeak of the corn market, the personal computer market, or the automobilemarket. However, at some point in time, each of these markets had to be sociallyconstructed. Drawing upon the literature of social construction of markets allowsfor informed speculation regarding the dynamics likely to emerge relative to agri-cultural commodity markets (Bender and Westgren, 2001; K.L. Bender, 2001.Product and exchange of attributes in defining boundaries for value-added corn andsoybean markets. Unpublished Ph.D. Diss. Univ. of Illinois at Urbana-Cham-paign.).

Selected scholars who study organizational behavior within firms and in-dustries examine the process by which markets emerge and develop. Porac et al.(J.F. Porac, A. J. Rosa, and M.S. Saxon. 1997. Americas family vehicle: Theminivan market as an enacted conceptual system. Paper prepared for the Multidis-ciplinary International Workshop on Path Creation and Dependence, CopenhagenBusiness School, August) use the terms artifacts and attributes in their model ofmarket evolution, and suggest that artifacts can be differentiated based on differ-ing conceptual clustering of attributes. That is, the artifacts that are socially con-structed by buyers and sellers are complex constructs of multiple attributes: prod-ucts. This conceptual clustering develops over time through social interactionsbetween buyers and sellers who develop shared knowledge of the artifact. Con-ceptual clustering leads to stable definitions of artifacts, which ultimately allows

940 SONKA ET AL.

for artifact transactions to extend beyond the initial set of producers and sellers toothers diffused in time and space. In their terminology stable product conceptualsystems are an intersection of understood attributes and usage conditions sharedacross the market divide; a stable product market exists to the extent that there isan equilibrium consensus in core attributes and uses for artifacts considered to bemembers of the market. In the complex global market for soybean and derivativeproducts, consensus must extend beyond local transactions between farmers andcountry elevators to include domestic and international merchandisers, processors,consumers, and regulatory agencies.

Markets for artifacts (products) evolve across what Porac and Rosa (1996)call the market divide, where the social construction process articulates betweenthe collective behavior of buyers and the collective behavior of sellers aroundproduct attributes (Fig. 1914). However, Fig. 1914 omits an important set of so-cial processes that affect the process. That is, the market is embedded in a socialcontext broader than just the market transaction.

Actors do not behave or decide as atoms outside a social context, nor do they adhereslavishly to a script written for them by the particular intersection of social categoriesthat they happen to occupy. Their attempts at purposive action are instead embeddedin concrete, ongoing systems of social relations. Granovetter (1985, p. 487)

Pinch and Bijker (1987) model the particular case of the social constructionof technology. To analyze the social processes around the development, codifica-tion, and acceptance of a new technology, one must identify the relevant socialgroups, problems, and solutions that shape a technological artifact (product). Themapping of the development process of a specific technology provides the oppor-tunity to observe if and when artifacts stabilize, and how this stabilization may dif-fer across social groups. Pinch and Bijker (1987) indicate that closure to problemsarising from artifacts may arise in two forms: rhetorical closure and closure by re-


Fig. 1914. A model of market construction. Source: Porac and Rosa (1996).

definition of the problem. Rhetorical closure occurs when the relevant social groupsfeel that the problem has been solved, whether or not the problem has actually beensolved. For example, a strict government labeling requirement for products con-taining transgenic soybean may force rhetorical closure on the discussion of pos-sible health risks. Consumers can opt for soy foods labeled as nontransgenic andavoid the risk, even though the risk may still exist in the transgenic foods. Closureby redefinition of the problem occurs through a shift in focus to another problem.This would occur if the concerns about environment hazards (e.g., genes escap-ing into wild species) are left behind in search for a solution to feed the worldsmalnourished.

The framework presented by Pinch and Bijker (1987) uses a set of diagramsto show the connectivity among artifacts, social groups, problems, and solutions.In their representation, an artifact is the central feature of the diagram, with linksto different social groups (Fig. 1915).

A schema of the relationship between an artifact, multiple social groups, per-ceived problems, and solutions is diagrammed in Fig. 1916. Figure 1916 includesone refinement of the framework designed by Pinch and Bijker (1987): the inclu-sion of links among social groups. Given the importance of network ties to socialconstruction, consideration must be made as to whether the social groups are in-terlinked (Uzzi, 1996). Early in the social construction process, there are many moreelements that are being tested cognitively by parties on both sides of the marketdivide than will appear as closure is reached. At closure, path dependence and pathdestruction will have eliminated some feasible and infeasible solutions. Problemswith solutions will become subsumed and no longer be part of the rhetoric, as willproblems that are redefined. This should be some comfort to those who see the cur-rent state of transgenic-market development as chaotic and intractable.

942 SONKA ET AL.

Fig. 1915. Network of an artifact and social groups.

194.2 Application to Soybean Markets

Some inferences can be drawn about possible pathways into the future for thetransgenic problem from reading ex post analyses of other socially constructed mar-kets and technologies. Central among these is that the existing, institutionalized mar-ket for homogeneous commodities will be a likely platform for construction of amarket for transgenic soybean. The commodity market is well understood and manyof the social groups involved in domestic and international commerce in soybeanand other commodities have a stake in it as an artifact. Their stake in the commoditymarket artifact also links these social groups in a network that should facilitate com-munication, organize stakeholder power, and thereby speed up the cognitiveprocesses on both sides of the market divide.

The pathway towards social construction of the transgenic soybean market(s)will be chosen in a complex process that balances the structural embeddedness ofthe commodity market among merchants and U.S. producers of soybean with thepolitical and cultural embeddedness in the social discourse of governments, scien-tists, consumers, and environmentalists. That is, the analysis of the cultural and po-litical landscape of the biotechnology controversy above is the context in which buy-ers and sellers socially construct the rules of exchange. For example, if substantiveequivalence is granted between transgenic and nontransgenic cultivars, then a soy-bean market driven by homogeneitythe commodity marketcan exist. To the ex-tent that some jurisdictions require identification and labeling of transgenics, thecommodity market offers a single solution: all soybean must be considered as trans-genic. Otherwise, the market channel must develop a system of physical separation,


Fig. 1916. Revised network between an artifact, social groups, problems, and solutions.

oversight and testing, and regulation (Fig. 1917) that creates separate markets forseparate socially constructed artifacts: transgenic and nontransgenic soybean.

For some consumers this is the minimal requirement to establish normativelegitimacy, which may be augmented by regulation. For other consumers, the sep-aration of transgenic and nontransgenic sources of soybean may be unnecessary andartificial; their tolerance for commingling may be effectively unlimited. Nonethe-less, if labeling and segregation are required for transgenics by enough end-usersin enough jurisdictions, we likely will see path destruction of the artifacts that tietransgenic soybean to undifferentiated, homogeneous commodities.

Markets are not developing solely on the basis of atomistic behavior. The con-struction of the transgenic soybean market is influenced by the relationship of manysocial groups with the artifact of genetic modification, and by the interrelationshipsamong social groups. For example, both labeling and additional testing or regula-tions are potential solutions that are identified for multiple social groups concernedwith a particular problem (adverse health effects of transgenics) as well as solutionsfor different problems across social groups. The frequency of occurrence of agiven problem or solution both within and across social groups may help identifythe priority with which these problems or solutions are considered in reaching clo-sure.

As buyers and sellers of soybean and other products that may be transgenicchoose solutions across the market divide that meet their particular requirements,they must do so in a way that conforms to the social and political constraints in whichthese choices are embedded. We are early in the social construction process and thealternative pathways to the eventual socially constructed market(s) are not clearly

944 SONKA ET AL.

Fig. 1917. Partial representation of the transgenic soybean artifact, social groups, problems, and so-lutions.

demarcated. Some may be foreclosed as a result of recent political choices on la-beling, but in many jurisdictions the political and cultural discourse is far from com-plete.

194.4 Summing Up

Speculation as to the future course of societal acceptance of transgenic agri-cultural products is indeed speculation. Events in society and in the laboratory thatwill happen tomorrow will interact with our current state of acceptance to forge thedynamics that will lead to acceptance or not in the various regions and markets ofthe world. But it is important to remember that genetic modification of soybean isonly one of several factors that are themselves interacting to pressure agriculturalcommodity markets to evolve to new states. These new states are being socially con-structed at this time.

Evaluation of the current situation in the context of social construction yieldsthe following four insights:

The pressure for increased differentiation of crops at the farm level comesfrom several interacting sources. Social concern regarding transgenic cropsis a key factor in some markets and locales. However, broader forces suchas food safety, environmental concerns, and advances in information tech-nology have the potential to interact in complex ways to fuel or retardchange.

The growth in market structures to deliver value-added crops will be de-termined by the potential value gained, the associated operating costs, andthe state of the system capability that exists to track and deliver agriculturalproducts. Traditional identity preserved marketing systems were limited inscale in large part because of the coordination technologies available. Ad-vances in information technology and managerial skills offer the potentialto create such systems which are scaleable and, when in place, operate atlow cost.

The demand for public oversight or certification of identity preserved sys-tems is increasing. The current identity preserved market channels tend tobe privately developed and implemented. The USDA has moved to certifyprivate testing labs to provide laboratory clientele with assurance of labo-ratory results. The USDA might pursue certification of private identity pre-served processes if there is demand for public involvement in identity pre-served systems, or could even choose to develop a U.S. identity-preservedsystem.

Internationally the demand for food system traceability is intensifying. TheEuropean Union has proposed requirements that would require traceabil-ity of soybean imports as to whether they are transgenic or not. Such pres-sure raises the potential for further decline in the proportion of the worldssoybean crop that is marketed as a commodity. Although the controversyregarding transgenic crops is one force encouraging traceability, it is onlyone among several forces. If traceability requirements are implemented andadopted widely, then significant adaptations will need to be made to agri-


cultural marketing systems. These pressures may continue even if the so-cietal concern regarding genetic modification of soybean were to diminish.

195 SUMMARY

This chapter described todays marketplace for soybean and examined keyforces likely to shape the soybean marketplace of tomorrow. The growth in soybeanproduction and consumption over the last 30 yr is impressive for an agricultural com-modity. The availability of soybean oil and meal allowed consumers to enhance theirdiets and level of well-being. The future soybean marketplace will be determinedby the complex interaction of many forces. Two of those forces will be the effec-tive demand for protein and the nature of the production/marketing system for soy-bean.

With income growth, the effective global demand for protein should continueto expand. Much of that growth would occur in Asia and other parts of the worldwhere lower income consumers would expend additional income to enhance theirdiet. Although the USA, Western Europe, and Japan would remain as significantmarkets, relatively little growth in demand is expected there. Global income growthis not assured, however. Reductions in income growth from levels consistent withthose of the latter part of the 20th century would significantly curtail the effectivemarket demand for protein. Although the number of malnourished is negatively cor-related with general income growth, significant numbers of malnourished are likelyto exist in Africa even with optimistic income growth.

Often, when times are favorable, agricultural productivity and the investmentin research needed to maintain productivity diminish as priorities. However, ex-amination of the costs of inadequate productivity (measured in terms of inflationin food prices) shows that inadequate productivity has dire human costs. Theworlds poor and near-poor bear the primary burden of shortfalls in productivitythrough decline in diet quality and increase in the number of malnourished.

For many years, the commodity market system has effectively served con-sumers and the soybean industry. Now, however, numerous forces (including so-cial concerns regarding transgenic crops) suggest that the homogenous nature ofthe commodity market is no longer adequate. Today we cannot discern how thosepressures will eventually effect the soybean production/marketing system, if at all.The soybean market (and numerous similar agricultural markets) is experiencingthe type of turbulence that is referred to as social construction of markets.

As the sector moves through this period of turbulence and potential change,scrutiny of four key concepts may offer insights as to the eventual form and char-acter of tomorrows soybean market. The pressure for differentiated farm outputcomes from several interacting forces, of which the controversy over transgeniccrops is just one. The eventual change in the market will occur as potential bene-fits are weighed against operational costs and the state of the information systemsthat underpin the market. The involvement of public oversight or certification canfurther fuel or retard change. The current move towards demanding traceability inEuropean markets has roots that extend beyond concerns regarding genetic modi-fication and are likely to persist even if those concerns were to dissipate in the fu-ture.

946 SONKA ET AL.

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Coplin, W.D., and M.K. OLeary. 1994. The handbook of country and political risk analysis. PoliticalRisk Serv., New York.

Ferris, J.N. 1998. Agricultural prices and commodity market analysis. WCB/McGraw-Hill, Boston.Fisher, D.K. 2000. Assessing how information affects cognitive maps of strategic issues. Unpublished

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ciol. 91(3):481510.Monsanto. 2002. Safety assessment of Roundup Ready soybean event 40-3-2. Available athttp://www.monsanto.com/monsanto/content/our_commitments/roundupsoy_product.pdf. (Verified 21

Nov. 21 2002.)National Research Council. 1997. Precision agriculture in the 21st century: Geospatial and information

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of science and the sociology of technology might benefit each other. p. 1750. In W.E. Bijkeret al. (ed.) The Social construction of technological systems: New directions in the sociologyand history of technology. The MIT Press, Cambridge, MA.

Porac, J., and A.J. Rosa. 1996. Rivalry, industry models, and the cognitive embeddedness of the com-parable firm. p. 363388. In J.A.C. Baum and J.E. Dutton (ed.) Advances in strategic man-agement. Vol. 13. JAI Press, Greenwich, CT.

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Chapter 19: Economics andMarketing19-1The Soybean Marketplace Today and How We Got Here19-1.1Using the Soybean Crop19-1.2Soybean Production and Exports19-1.3Summing Up

19-2 The Dynamics of Tomorrow'sGlobal Appetite for Protein19-2.1Model Structure19-2.2Future Needs and the Role of Income19-2.3Future Agricultural Productivity and Innovation: Who Cares?19-2.4Summing Up

19-3 Will Tomorrow'sMarket Place be Dominated by Todays Commodity Market Approach?19-3.1 The Structure of Today'sMarketplace19-3.2Market and Social Forces for Change

19-4The Social Construction of Alternative Markets19-4.1The Market Construction Process19-4.2Application to Soybean Markets19-4.3Summing Up

19-5SummaryReferences

steven sonka - books agronomy

Documents

soybean cropsince

formance of soybean

soybean sector

soybean marketplace

soybean marketplace

soybean production

soybean glycine max

consumption of soybean