Soybeans

Globally traded and highly versatile, the soybean is the world’s largest source of animal protein feed and the second largest source of vegetable oil. Climate change and deforestation are the most salient issues associated with soybean production.

This brief provides a summary of the main environmental and social factors that affect soybean production worldwide; however, it spotlights key players in the U.S. value chain and provides examples of actions being taken by companies operating or headquartered in the U.S.

KEY TAKEAWAYS

Soybean production has more than doubled worldwide over the past 20 years, expanding into a $123 billion market. As global demand for meat has increased, the use of soybeans in livestock feed has exploded. In human food products, soybeans are used as a cooking oil, a source of protein in meat and dairy substitutes and an ingredient in many processed food products.
Deforestation and the loss of native vegetation is the most salient, region-specific issue associated with soybean production. It is a significant driver of greenhouse gas emissions and leads to the loss of biodiversity, which impacts not only the health of the local ecosystem but also the local populations that depend on these natural resources to survive.
In the Amazon Basin, the Atlantic Forests and the Brazilian Cerrado, carbon dioxide emissions (CO2) from land conversion are significant. Based on the Cerrado alone, this equals about 60 percent of Spain's total emissions in 2015. While the Soy Moratorium in Brazil has reduced impacts on the Amazon, the loss of native vegetation in areas like the Cerrado, that are not covered by the Moratorium, remain a material business risk.
Investors should address risk in the soybean supply chain through direct engagement with their portfolio companies and by supporting relevant policies and multi-stakeholder collaborations. Effective implementation of a company's policies requires promoting commodity traceability and having a clear approach to supplier engagement, verification and disclosure of progress.

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Environmental and Social Factors that Drive Risks

Climate Change
Deforestation and Land Use Change
Soil Health and Biodiversity
Land Rights
Water Use and Pollution
Working Conditions

Climate Change

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The three main ecoregions most affected by soybean production in South America are the Amazon Basin, Atlantic Forests, and the Brazilian Cerrado. Greenhouse gas emissions from land conversion in the Cerrado alone were estimated to equal 488.37 million barrels of oil in 2017.
Deforestation and Land Use Change

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In the Amazon, an area of the world that plays a vital role in regulating the global climate, soybean production has historically been a major driver of deforestation. In the Cerrado grasslands, a global biodiversity hotspot that stores substantial amounts of carbon and is a key source of the water critical for Brazil's agricultural productivity, soybean production has already contributed to the conversion of more than half the savannah. Estimates predict the possible destruction of a further one-third of the Cerrado by 2050 if current conversion rates continue.
Despite efforts made to reduce deforestation in the Amazon (such as more intense monitoring and the Soy Moratorium in Brazil), the risk of land conversion for soy production continues to be significant. In fact, after a noticeable deceleration in deforestation rates between 2004 and 2012, there has now been a serious uptick. Land conversion and deforestation to grow soybeans in other biomes, such as the Cerrado (where 60% of Brazilian soy is grown), is also expected to remain a material business risk. Since the current Brazilian law (the Native Vegetation Protection Law) still allows for legal conversion of land in the Cerrado, various efforts are underway to stem the ongoing rapid conversion of this critical ecosystem. These efforts include collaborative announcements like the Cerrado Manifesto and other initiatives to restore degraded lands. While the Soy Moratorium in Brazil and other factors have helped to reduce soybean production in the Amazon, the loss of important native vegetation in the Brazilian Cerrado, which is not covered by the Moratorium, and where 60 percent of soy is grown, is expected to remain a material business risk. Since the current Brazilian law (the Native Vegetation Protection Law) still allows for legal conversion of land in the Cerrado, various efforts are underway to stem the ongoing rapid conversion of this critical ecosystem. This includes collaborative announcements like the Cerrado Manifesto and other efforts to restore degraded lands.
Soil Health and Biodiversity

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The cutting down and plowing up of natural vegetation for soybean production generates greenhouse gases that contribute to climate change. It also leads to the loss of biodiversity, which impacts not only the health of the local ecosystem but also the local populations that depend on these natural resources to survive. In the U.S., largely driven by demand for biofuel feedstocks, millions of acres of important grasslands in the Great Plains have been converted to cropland in the last several years leading to reductions in biodiversity (e.g., bird populations) and the loss of soil carbon. These impacts are of particular concern in countries that are home to some of the most biodiverse areas on the planet, including Brazil, Argentina and Paraguay. Companies that fail to understand and manage impacts related to these issues may face market, reputational, litigation and operational risks (see more at Ceres’ Agricultural Supply Chains as a Driver of Financial Risks).
Land Rights

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Soybean production in developing countries, such as Brazil, Argentina and Paraguay, has been associated with negative social impacts, particularly when small-scale farmers and communities have been pushed off their lands to make way for commercial soybean operations. In such instances, land rights of indigenous or local communities may not be documented or recognized, leaving local people at risk of losing their homes and livelihoods when they are evicted or wrongfully displaced from their land. Companies that fail to understand and manage impacts related to land rights may face market and reputational risks such as protests, work stoppages or damaging social campaigns from activist groups.
Water Use and Pollution

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Demand for irrigation water use varies greatly between soybean-producing countries and regions. For example, soybeans are mainly a rainfed crop in South America but are more heavily irrigated in other regions. In areas where soybean production relies on irrigation, unsustainable water use can strain aquifers, such as the Ogallala Aquifer in North America and the Guarani Aquifer in South America. Globally, nearly 20 percent of soybeans are grown in regions of high or extremely high water stress (e.g., U.S. and China), meaning regions where existing water supplies face intense competition and in some cases growing regulation. Companies that fail to understand and manage impacts related to these issues may face operational, reputational and regulatory risks (see more at Ceres’ Agricultural Supply Chains as a Driver of Financial Risks and Feeding Ourselves Thirsty).
Working Conditions

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Soybean production has not been a major driver of working condition concerns.

Commodity Background

The Vast Majority of Global Soybean Production is Used to Feed Animals

Globally traded and highly versatile, soybeans are the world’s largest source of animal protein feed and the second largest source of vegetable oil.
About 85 percent of global soybean production is crushed into meal and vegetable oil. The other 15 percent is sold as whole beans.
Of the soybeans crushed: 80 percent is used for meal; 20 percent for vegetable oil.
For the meal: virtually all (98 percent) is used to feed animals (e.g., pigs, poultry, cattle and farmed fish); 2 percent is processed for food use.
For the oil: most (95 percent) is for food use — cooking oil and processed food products such as margarines, dressings and mayonnaise—with the remainder (5 percent) used for industrial products such as fatty acids, soaps and biodiesel.

Top Production Regions

The U.S., Brazil and Argentina account for more than 80 percent of global soybean production.

Production Statistics, Trends, and Drivers of Demand

321 million metric tons:
Average global soybean production

$112 billion:
Global production value

38 percent:
Proportion of global production exported

Supply Chain

The soybean supply chain is complex and includes many sectors, however a small group of big companies control large volumes of production at key points in the supply chain.

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Company Examples

McDonald's

McDonald’s in Europe is striving for 100 percent sustainably certified soy in its chicken meat supply chain by 2020. In 2014, its suppliers of chicken products purchased more than 58,000 RTRS credits, which covered about 20 percent of McDonald’s soy needs.

Smithfield

Smithfield, as a pork producer which purchases large quantities of animal feed containing soybean meal, has set a goal to have 75 percent of its grain purchased go through a fertilizer optimization and soil health program by 2018. In 2016, 55 percent of Smithfield’s total grain purchases came from farmland participating in the SmithfieldGro Program and/or the Land O’Lakes’ SUSTAIN™ sustainability platform.

Unilever

Unilever sourced 72 percent of its soy oil from sustainable sources in 2017. In the U.S., soybeans are Unilever’s most important agricultural raw material, as the oil is used in Hellmann’s mayonnaise. As part of its commitment, Unilever partnered with ADM and other important stakeholders in a program that helps soy farmers and soy oil suppliers in Iowa increase the use of cover crops and qualify for cost share payments. This program involved around 170 farmers cropping more than 26,000 acres in 2017.

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