Rising global biofuel production drove demand for Canadian soybeans, boosting revenue
New York, NY (PRWEB) March 03, 2014
The Soybean Farming industry experienced strong growth over the five years to 2014, mainly due to the crop's status as a major input for biofuel. The Renewable Fuels Regulations of 2010 allowed Canada to use soybeans as a renewable energy source to make biodiesel. The regulations set a requirement of mixing renewable fuels into diesel. Furthermore, increasing biofuel production worldwide drove demand for Canadian soybeans. These regulations created a significant new market for soybeans, reinvigorating demand. As a result, industry revenue has increased at an estimated annualized rate over the five years to 2014.
Global demand for soybeans also rose over the past five years. A depreciating Canadian dollar over much of the period made domestic products relatively inexpensive to foreign buyers and stimulated industry exports. In order to meet such high demand, farmers increasingly turned to genetically modified (GM) seeds to produce high-yield crops that were resistant to diseases and pests. Furthermore, according to IBISWorld Industry Analyst Antal Neville, “the devastating US drought in 2012 helped the industry by diverting demand, driving export growth to a staggering average per year in the five years to 2014.” In 2014, industry revenue is expected to significantly grow thanks to expanding production and rising soybean prices.
The skyrocketing demand for soybeans drove farmers to raise their prices over the period. Thus, the world price of soybeans is expected to increase at an average annual rate. Farmers especially benefited from spikes in 2011 and 2012. These price jumps have kept average industry profit margins high in the past five years.
The Soybean Farming industry remains largely fragmented due to a low level of consolidation. Through the next five years, strengthening overseas competition is anticipated to keep revenue volatile. Still, “the future for Canadian soybean farmers remains sunny,” says Neville. Domestic and international government mandates for renewable fuel will keep soybean prices above historical levels over the five-year period. Also, demand from emerging economies such as China will keep exports high, expanding another revenue stream for the Soybean Farming industry. Consequently, revenue is forecast to grow at an average annual rate over the five years to 2019. IBISWorld anticipates that profitability will continue to remain high.
For more information, visit IBISWorld’s Soybean Farming in Canada industry report page.
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IBISWorld industry Report Key Topics
The Soybean Farming industry grows soybeans. Soybeans are most often used in livestock feed and vegetable oils, although a growing proportion of the crop is being used in biofuel production.
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