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Published 2004

19

Economics and Marketing

STEVEN T. SONKA
University of Illinois
Urbana, Illinois
KAREN L. BENDER
University of Illinois
Urbana, Illinois
DONNA K. FISHER
Georgia Southern University
Statesboro, Georgia

This chapter will describe today’s marketplace for soybean [Glycine max (L.)
Merr.] and examine key forces likely to shape the soybean marketplace of tomorrow. The description of today’s marketplace includes global dimensions of production and utilization as well as the patterns that have emerged to lead to today’s
setting. Looking to the future, there are many forces that will shape the future evolution of the soybean market. Two of these forces will be considered in detail within
this chapter. One force is the future need for protein, in the context of future levels
of global population, income, and malnutrition. Another section examines pressures
for change in the commodity marketing system. This approach has dominated, and
continues to dominate, the soybean sector. However societal desires for more information regarding production and marketing in the food system, in part fueled
by concerns about genetic modification of agricultural products, coupled with advances in information technology, combine to make it potentially feasible for alternative market systems to emerge and supplement or supplant the commodity approach. If that change were to occur, it is likely to have ramifications throughout
the supply value chain, including the research institutions that traditionally support
that chain.
One of the most discussed changes in the soybean marketplace in the 1990s
was the introduction and widespread adoption of transgenic soybean in the USA
and Argentina. Introduced in the middle of the 1990s, Roundup Ready (Monsanto
Co., St. Louis, MO) soybean cultivars increased to more than 71% of soybean production in the USA by 2001 (Monsanto, 2002). Globally, Roundup Ready soybean
cultivars accounted for 63% of all transgenic crops grown (Monsanto, 2002). Although producers in general have welcomed these technological innovations, the
societal response has been quite negative among some political interest groups. The
resulting controversy has intensified the pressure for fundamental change in agriCopyright © 2004. American Society of Agronomy, Crop Science Society of America, Soil Science Society of America, 677 S. Segoe Rd., Madison, WI 53711, USA. Soybeans: Improvement, Production,
and Uses, 3rd ed, Agronomy Monograph no. 16.
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SONKA ET AL.

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

19–1 THE SOYBEAN MARKETPLACE TODAY
AND HOW WE GOT HERE
This section of the chapter will provide a brief review of the market performance of soybean globally over the last three decades or so. The primary variables of interest will be consumption of soybean meal and oil, production (globally and for key producing nations), trade, value, and prices.
19–1.1 Using the Soybean Crop
Since the 1970s, the global economy performed admirably as people in many
parts of the world shared in the increased abundance fueled by globalization (The
Economist, 2001). As income levels increased in Asia, Mexico, Latin America, and
other nations, consumers chose to enhance their diet by consuming greater quantities of animal protein and fats and oils. The soybean crop, and those farmers around
the world who produced it, played a key role by providing the protein for livestock
feed and soybean oil for human consumption. In 1999, soybean oil comprised nearly
30% of the global consumption of vegetable oils (Soy Stats, 2002). Even more impressive, soybean meal accounted for almost 70% of the world’s protein meal production in that year (Soy Stats, 2002).
Despite considerable interest and expenditures, industrial uses of soybean
products, including use as alternative fuels, remain speculative and small. In the
USA, for example, soybean meal production exceeded 34 metric tonnes and soybean oil production exceeded 8 metric tonnes in 1999 (Soy Stats, 2002). Industrial
uses, in total, were <10 thousand metric tonnes. Industrial and energy uses of soybean products could, of course, dramatically increase in the future. Legislation mandating such use, either for environmental or political reasons, could fuel such a
change. But little evidence of such an increase is indicated in marketplace experience to date. Thus, this discussion focuses on food and feed uses for soybean oil
and meal, respectively.
As a feedstuff for livestock, soybean meal plays a central role in contributing to protein availability across the world. Direct human consumption has been a
far more limited use of soybean, except in certain countries in Asia. For example,
data from the United Nations Food and Agriculture Organization (FAO) show that
food consumption of soybean amounted to about 8% of the total 1999 soybean crop
(FAO of the United Nations, 2002). In Japan, Korea, China, and Indonesia, however, soybean is a dietary staple. Consumption of traditional soybean products such
as tofu, tempeh, and miso typically is a key component of the diet in these countries.
In recent years, there has been an explosion of interest in other parts of the
world in the human consumption of soy-based products, in addition to those traditional products (United Soybean Board, TalkSoy, U.S. Soy Foods Directory, 2002).
This interest has been fueled by several factors, but one widely cited factor is the

S. Although production in the USA more than doubled since the 1970s. with global soybean production doubling. As was the case globally. Production in the USA also stagnated in the 1980s and Fig. production jumped sharply during the 1970s. and pastas has greatly intensified. accounting for almost three-fourths of world production. on the other hand. Starting at slightly more than 43 metric tonnes in 1970. In the USA. first exceeding 160 metric tonnes in 1998 (FAO United Nations. Interest in the use of soy-based products in soymilk. 2002). production leaped upward again.S. with average production in the years 1989 to 1991 only 30% higher than at the start of that decade. palm oil production was almost 15 times greater than it was in 1961 (FAO of the United Nations. has been subjected to considerable pressure from alternative sources of vegetable oil in recent years. achieving in excess of 75 metric tonnes in 2000. the USA now accounts for less than half of global soybean production. 2002). soybean production: 1970 to 2001. Soy Foods Directory. the massive increase in palm oil production and use is particularly noteworthy. The 1980s saw a much slower rate of increase.ECONOMICS AND MARKETING 921 Food and Drug Administration (FDA) approval of a health claim for soybean linking soybean consumption to the potential for reducing cholesterol levels (U. the total quantity of soybean utilized in these products remains relatively small. exceeding 50 metric tonnes for the first time in 1978. Canola oil and olive oil are two competitors that appeal to some health segments of the market. From a volume perspective. production in 1970 was nearly 31 metric tonnes. baked goods.2 Soybean Production and Exports Figure 19–1 presents production data for soybean globally and in the USA since 1970. At nearly 22 metric tonnes in 2000. Although growth in the consumption of such products has been sparked in recent years. The 1970s were a period of rapid increase. global production increased nearly fourfold. cereals. World and U. 19–1. Soybean meal has held and continues to hold a commanding position relative to other sources of meal for protein. however. . Soybean oil. however. The 160 metric tonnes level now being achieved is 50% greater than the level attained at the start of the 1990s. 19–1. 2002). During the 1990s.

Taiwan.5 and 0. 19–2. 19–3). Production levels in both Brazil and Argentina were inconsequential in 1970 (1. By the late 1990s. at a level exceeding one billion dollars in soybean imports. Soybean production in the five largest producing nations: 1970 to 2001. which produced only a few thousand metric tonnes in the 1970s. Japan. this massive increase in production has been employed to provide soybean meal for livestock feed and soybean oil for consumers. The European Union. Then. production increases in Brazil and Argentina far outpaced those levels. The introduction of China. and concerns regarding transgenic soybean are all rationales that could contribute to explaining these trends. which started the 1970s as the second largest producing nation. since 1996 export growth has stagnated.922 SONKA ET AL. A strong U. Exports from the USA. Prior to 1994. followed the global upward pattern from 1970 to the early 1980s. and Mexico are on this list for both years. now is fourth in total production. increased production in other nations.1 metric tonnes. Figure 19–2 provides data on soybean production levels for the top five producing nations.7 million in Brazil and 20. Global soybean exports increased over threefold between 1970 and 1999 (Fig. attained production levels in excess of 5 metric tonnes by the end of the 1990s. The data for the USA are the same as that shown in Fig. however. enhanced technology and management.S. The global increase in exports documents a significant component of this increase in need. respectively). production in those two nations exceeded 50 metric tonnes (32. Although production has increased by more than 80% in China. production in the USA hovered in the 50 to 60 metric tonnes range. the pace of increase slowed substantially in both absolute terms and relative to global exports. however. production in the USA has jumped to levels well above 70 metric tonnes. The early 1990s saw a significant “uptick” in exports from the USA. production increased substantially. 19–1. Because of good weather. for much of the early 1990s. Fueled by global economic growth.S. Table 19–1 identifies the top five importing countries for U. although the quantities imported have slipped for all but Mexico.2 million in Argentina in 2000). China. soybean in 1990 and 2000. India. Since 1994. Fig. is a dynamic of considerable interest. . dollar. and domestic farm income support policies.

exports of soybean: 1970 to 1999.S. Value of U. 1990 2000 (Million $s) European Union Japan Taiwan Mexico South Korea 1433 821 411 200 194 Fig.6 billion.S. 19–3. Although not as widely discussed. the value of soybean meal and oil exports is a substantial component of the international revenue stream for the U. 19–4.ECONOMICS AND MARKETING 923 Fig. Top five customers for U. not just on the value of soybean exports.S. World and U. exports: 1970 to 1999. During this same 3-yr Table 19–1. soybean industry.S. but also on the value of soybean meal and oil exports. 2000). For the 1997 to 1999 period. (Million $s) European Union China Japan Mexico Taiwan 1143 1008 758 678 385 . Figure 19–4 provides information. the value of soybean exports exceeded $5. soybean (1990 vs.

soybean farmers. the combined value of the exports of soybean meal and oil exceeded $2. farmers for soybean from 1974 to 1999 (Soy Stats. The rapid drop in crop value since 1996 documents the current economic stress of U.S. Farm program policies. Farm price of U.S. These are in nominal. Unfortunately both those periods of increased revenue were not sustained. Value of U. Soybean revenues saw two periods of rapid increase. 2002).S. Figure 19–5 describes the total annual value of the U. 2002). Fig. not real. That ratio appears to have fostered increases in soybean hectares relative to other crops. 19–5. the negative effects of low prices on net income of soybean farmers. soybean crop from 1970 to 1999 (Soy Stats. 19–5.1 billion dollars. These data do not include the direct financial impact of domestic farm policies which have mitigated. especially the ratio of the soybean to corn (Zea mays L. soybean: 1970 to 1999. The volatility of crop revenues also is documented in Fig. soybean crop: 1974 to 1999.S.S. 19–6. Fig. to a large extent. terms.) loan rates in the 1996 legislation.924 SONKA ET AL. Figure 19–6 presents data on the farm price received by U. One was in the first half of the 1970s and the second was in the mid-1990s. . period. influenced the amount and location of soybean production in the USA.

The Protein Consumption Dynamics (PCD) Model simulates future global protein appetite scenarios based on population and income growth.ECONOMICS AND MARKETING 925 Since 1975. 2000)1. pork. a region’s income and population increase each year at specified rates. . highlighting the systematic relationships between population. The effects of cultures and dietary preferences are reflected in the regionally-specific econometric estimates between income and food appetite. In the 1970s. the last decades of the 20th century saw unprecedented growth in economic well-being. Soybean oil and animal protein fed with soybean meal are important vehicles which allow consumers to translate their income gains into enhanced diets. To address this concern. The continuing global need for soybean and soybean products is demonstrated by the sharply increasing levels of soybean exports that occurred over the last 30 yr. the Soybean Industry Chair in Agriculture Strategy. fish. are substantially below that level. fats and oils.3 Summing Up As a major agricultural commodity. for soybean. 19–2 THE DYNAMICS OF TOMORROW’S GLOBAL APPETITE FOR PROTEIN One of the key issues facing agricultural producers in general. and malnutrition (Fisher. for each year from 2001 to 2025. 19–1. In general. acted to greatly extend the geographic reach of significant soybean production. is uncertainty regarding the future need for protein and. on a global basis. in the 1980s and 1990s. however. poultry. the National Soybean Research Laboratory (NSRL) developed a system dynamics model to explore the potential appetite for protein in the world food system. 19–2. Recent prices. As lower and middle-income consumers experience a gain in income. and other supporters of the National Soybean Research Laboratory. However. therefore. production increases in other parts of the world. appetite (potential demand). a traditional response is to upgrade their diet status. and the soybean industry in particular. It tracks the human appetite for six agricultural commodities (beef. notably Brazil and Argentina. and vegetable protein). soybean prices oscillated around the $6 per bushel level.1 Model Structure Figure 19–7 illustrates the relationships made explicit in the Protein Consumption Dynamics (PCD) Model. In the model. the growth in soybean consumption and production has been noteworthy. income. The model also provides estimates of the extent of malnutrition for the same time period. The effects of per capita income and cultural influences are combined to develop estimates of appetite (potential demand or consumption) and malnutri1 Model development was funded in part by the Illinois Soybean Program Operating Board. production increases were heavily tied to North America.

which are consistent with those identified by both the World Bank and the U.N. the probability of each scenario occurring is not important. These per capita estimates are then multiplied by the appropriate population estimates for each region to compute total potential demand for the various commodities. • Lower Income Case: Uses the same population projections as the Base Case.2 These are: • Base Case: Employs population growth projections consistent with World Bank and U. but income growth rates are 50% smaller than those of the Base Case. . Historic and future malnutrition data are taken from FAO and Bread for the World (BFW. are delineated in Table 19–2. income growth levels. food appetite patterns. and cultural characteristics. For our purposes. Relationships underlying the protein consumption dynamics model.htm. The historic consumption data are taken from the 1997 FAOSTAT Statistical Database.926 SONKA ET AL. Fig. Population and income growth information are based on secondary data taken from the World Bank and the FAO. We are more concerned with getting decision makers to consider alternative potential futures.N. 19–7. tion for each region. To illustrate this capability.fao. two future scenarios are defined. 1998). A key reason for the development of this model was to have the capability to compare the effects of alternative assumptions on the desire and need for protein across a range of parameter values. FAO. The regions are defined to be relatively homogeneous in terms of income.org/NEWS/1999/991004e. These regions. Cultural differences are incorporated through the designation of eight demographic regions. The 2 These scenarios are projections as defined by Ferris (1998). FAO medium-level projections and income growth projections consistent with the actual experience of the last two decades.3 It is difficult to find long-term income growth rate projections from official sources. The model framework requires that future income and population growth be projected for each region. than in predicting the future. 3 More information on malnutrition can be found at: http://www.

50 3. 19–9 because of scaling difficulties.50 3.00 2. Australia.50 1. Fig. Fig. and South Asia (163%) (Fig.00 1.80 1. of course. Eastern Europe. North America. Australia. 19–2. Protein consumption dynamics (PCD) regional definitions. 19–9). and Japan) and the Transition Economies.60 5.00 1. very strong per capita income growth would occur in China (585%). New Zealand.60 5. starts at a very large initial level. For the Base Case Scenario. 1994).40 2.00 3. and expert judgment. Income growth in the OECD countries is roughly equal to the global average but. Based upon these assumptions. Data for the OECD region is not included in Fig. Growth in total gross domestic product (GDP) is weak in the regions with high population growth. Conversely. East Asia (209%).40 9.60 1. North America.20 −1. The information provided here is only a small subset of data that the modeling tool can provide. China East Asia Transition economies (the countries of the former USSR. New Zealand.ECONOMICS AND MARKETING 927 Table 19–2.70 Lower income % China East Asia Transition economies Latin America MENA OECD South Asia Sub-Saharan Africa World 4. roughly 5% for both regions. A more complete analysis is available in Fisher (2000).60 2.90 † Historic annual income growth rates are averages from 1984 to 1996. 19–8 and 19–9 present estimates of regional population and per capita income for the Years 2001 through 2025. published literature on future prospects (Coplin and O’Leary.00 6.70 1. an increase of more than 50% in population for both.10 0.2 Future Needs and the Role of Income This subsection describes the modeling results provided by the PCD model.00 −0. Population growth is relatively low in the OECD region (the relatively economically well-off nations of Europe.40 2. and Japan) South Asia Sub-Saharan Africa Table 19–3. Although the numbers have profound implications for many measures of human well being.20 7.30 2. income projections employed here (in Table 19–3) are based upon historic rates of income growth. and Turkey) Latin America Middle East and North Africa (MENA) OECD (The relatively economically well-off nations of Europe. Regions Historic† Base case 10. the estimates are likely not too surprising in themselves.00 0.50 2.20 1. 19–8 shows relatively high population growth in the MENA and Sub-Saharan Africa regions. The result is a de- . Annual income growth rates.

Base case 2001 to 2025. Globally. . Base case 2001 to 2025. the appetite for animal protein increases by 81%. 19–8. Table 19–4 indicates how the forces shown in Fig. Fig. fish by 86%. cline in per capita income for the Sub-Saharan Africa and MENA regions.928 SONKA ET AL. and vegetable protein by Fig. −3% and −17%. Population growth. Per capita income growth. fish. and vegetable protein. 19–8 and 19–9 could impact the appetite for animal protein. 19–9. respectively.

respectively.14 2025 106 0.2 27.09 0.22 0.3 % 146 213 24 44 27 7 745 64 81 Fish 2001 2025 Change million metric tonnes 18. will not devote a significant portion of any additional income to expenditures for food. both the number and the proportion of the globe’s undernourished population have declined.4 25.2 2.3 4.9 24. which would experience increases in the number malnourished of 78 and 97%. 2000). Base case scenario: Human malnutrition (2001–2025).1 9.1 45.2 211. By the Year 2025. Figures 19–10.2 Change Proportion undernourished 2001 % −95 −55 9 97 −51 78 −19 no.8 29.3 193.01 0.05 0.3 11. Lat.5 79. 7% for animal protein.11 0. This reflects the fact that people in the OECD countries.35 0. the region still accounts for nearly 20% of the total appetite (Fisher. econ.8 5.3 8.4 2025 106 9. 213%. Growth in the OECD is relatively modest. Sub-Saharan Africa would account for 56% of the world’s malnourished.7 83.5 134. in general. East Asia. −1% for fish. and vegetable protein consumption (2001–2025).15 0.8 23.9 17.1 3. 19–8 and 19–9.7 10.9 674.36 0.3 29.9 69.0 7.3 6. and South Asia show large increases in the appetite for animal protein. 146%.15 0.9 5. Unfortunately this relatively positive result at the global level masks serious regional problems. The result is less income spread across the same number of people as in the Base Case Scenario.7 6.4 349.11 0.5 58.ECONOMICS AND MARKETING 929 Table 19–4.1 8.0 50. and −17% for vegetable protein.7 5.3 113.6 6.4 6.4 2. given the population and income parameters shown in Fig.7 2. 19–11.6 15.7 31. China.6 6. fish.9 80.8 Vegetable protein 49.09 Change % −93 −67 −15 22 −64 3 −37 .7 % 57 44 23 28 58 −17 43 67 38 38%.7 34. Over the last three decades. and 19–12 compare the estimated appetite for the various commodities (anTable 19–5.6 836.0 2001 % 2025 Change million metric tonnes 172 107 28 54 27 -1 310 63 86 5. America MENA South Asia SS Africa World 182.3 78.6 9.1 6.9 21.6 275. × 0.08 0. however.3 35. Table 19–5 indicates that at the global level. continuation of this trend is possible.13 0. Base case Region Number undernourished 2001 no. and 745% respectively.2 63.9 7.8 1.2 375. × China East Asia Lat.8 4.7 4.1 10.6 7. the annual income growth rates are reduced by 50% from their level in the Base Case Scenario. Animal protein Region 2001 2025 Change million metric tonnes China East Asia Trans.0 27.9 156.1 73. For the Lower Income Scenario. especially in the Sub-Saharan Africa and MENA regions. America MENA OECD South Asia SS Africa World 46. Base case scenario: Animal protein. that even though the OECD had the smallest level of change in the appetite for animal protein.4 24. It should be noted.2 9.

OECD. 19–11. Income and population have a strong influence on malnutrition (Fig. The Transition Economies. respectively) between scenarios. In contrast. East Asia. The strong relationship between income and appetite patterns is evidenced by the sharp decline in animal protein appetite for the Asian regions of China. Each figure shows the appetite for a given commodity for the Base Case and the Lower Income scenarios in the Year 2025. Base Case scenarios. as seen in Fig. Latin America. and Sub-Saharan Africa indicating a substitution of vegetable for animal protein. 19–13). The number of malnourished exceeds 400 million people in Sub-Sahara Africa under the assumptions of the Lower Income Scenario. Scenario comparisons for animal protein appetite in the Year 2025. Finally we turn to the comparison of malnutrition results between the scenarios. Sub-Saharan Africa accounts for more than a third of the world’s malnutrition. Fig. MENA. South Asia is a region that is particularly sensitive to income growth. as malnutrition would increase by more than 100 million people in the Lower Income vs. 19–12). In the Lower Income Scenario. MENA.930 SONKA ET AL. imal protein. the appetite for animal protein in the other regions is more affected by the reduced income. with more than 350 million people underfed. The decrease in income associated with the Lower Income Scenario brings about startling increases in malnutrition in all six regions. even in the Base Case Scenario. Cultural differences influence the appetite for vegetable protein between regions (Fig. increases in the number of malnourished are exhibited in all regions. The appetite for fish exhibits similar patterns. the appetite for vegetable protein increases slightly in Latin America. . fish. and South Asia in the Lower Income Scenario. and Sub-Saharan Africa regions all show little variation in the appetite for animal protein between the two scenarios. 19–10. and vegetable protein. With lower income growth.

ECONOMICS AND MARKETING 931 Fig. Before and after those years. 19–2. safe food supplies are the ultimate product of agricultural productivity and innovation. Extending the work just described. that abundance reduces the public’s willingness to financially support the continual efforts needed for agricultural research innovation. the Food Price Inflation Case: • Food Price Inflation Case: For the years.3 Future Agricultural Productivity and Innovation: Who Cares? Abundant. However. . Scenario comparisons for fish appetite in the Year 2025. prices for food commodities are constant in nominal terms as in the first run. we’ve defined a third scenario. food availability is primarily reflected through the level of food prices. for the last 5 yr citizens of the developed world have benefited from past agricultural research and favorable growing conditions through unusually abundant food supplies. Indeed. 19–11. 2006 to 2015. it often is difficult for citizens and public policy makers to see and appreciate the linkage between food in grocery stores and the need for innovations from agricultural research. In the PCD framework. low cost. Unfortunately. commodity food prices follow the annual inflationary pattern that existed during the decade of the 1970s. Therefore we undertook to use some recently developed modeling capabilities to explore the notion of agricultural productivity and potential future costs of constraining agricultural productivity.

. estimates for one variable. Fig. Scenario comparisons for vegetable protein appetite in the Year 2025. With constant food prices (and future world economic growth consistent with that of the last two decades of the 1900s and moderate population growth in the future). more than 960 million additional people. is the comparison setting. as population growth would swamp income growth. South Asia. Table 19–6 provides key results for selected years.932 SONKA ET AL. To summarize these effects. This stipulation is consistent with the actual experience of the last two decades for numerous agricultural commodities (Fig. In 2015. the year of peak malnutrition for the three regions. malnutrition levels skyrocket. future prices for food commodities are held constant in nominal terms (declining in real terms). just in these three regions. the number of malnourished would be more than 700 million greater in the Year 2025 than in the scenario with no food price inflation. starting in the Year 2006 (but using the same population and economic growth assumptions as previously). however. 19–12. described previously. This analysis assumes that food prices stay constant after 2015. The analysis examines the effect of just 10 yr of food inflation. would suffer malnutrition because of the lack of agricultural productivity. The Base Case scenario. Despite that. In Sub-Saharan Africa. If food inflation rates follow those that actually occurred during the decade of the 1970s. 19–6). and Sub-Saharan Africa. even constant food prices are not sufficient to keep malnutrition levels from increasing. malnutrition levels would decline dramatically from their current levels in China and South Asia. In that situation. are shown for the three key regions of China. the number of people malnourished.

The cost of overly restraining innovation could be hundreds of millions of additional hungry people. These implications form the basis for further strategic discussion. The industry’s growth since 1975 occurred mainly in the OECD region. Area Current 2025 with constant prices 182 000 000 275 000 000 211 000 000 11 000 000 143 000 000 376 000 000 2015 with food price inflation 2025 with food price inflation no. There is an important disconnect between some of the industry’s key skills and capabilities and those it will need in the future. 19–13. pork. and vegetable protein) in eight regions that encompass the world. fish. fats and oils.ECONOMICS AND MARKETING 933 Fig. for six agricultural commodities (beef. Estimates of the number of malnourished humans with constant vs. poultry. Scenario comparisons for number malnourished in the Year 2025. As citizens and public policy makers evaluate biotechnology and other agricultural research innovations.4 Summing Up The PCD model tracks annual estimated human appetite (potential demand) from 2001 to 2025. it is critically important to understand that restraining agricultural innovation is not a “risk-free” decision. Therefore the inTable 19–6. inflating food prices. The results of this analysis document the stark and dramatic effect of the lack of agricultural research innovation on the well being of the world’s poor. 1. 19–2. Four key implications emerge from analysis of the PCD simulation results. of people China South Asia Sub-Saharan Africa 432 000 000 574 000 000 502 000 000 201 000 000 469 000 000 601 000 000 .

and South Asia regions) surges. The other distribution system is focused on high-value traits. The problem with these two primary distribution systems is that neither channel can cost effectively supply the new differentiated value-enhanced crops. that region is unlikely to be the source of significant volume growth in the future. However. East Asia. Two primary distribution systems exist for soybean in commercial agricultural systems. there is a growing need for market channels that will allow distribution of a product that is identity-preserved (Sonka et. Historically. malnutrition in the Sub-Saharan Africa and MENA regions persist at frightening levels. relative to the high-value trait crops. such as the world has experienced in the last few years. as well as its research direction. dustry’s marketing and policy expertise. The market need for protein declines significantly between the Base Case and the Lower Income Case. Therefore new skills and capabilities are needed to serve the potential growth markets of the world. 2000). 19–3 WILL TOMORROW’S MARKETPLACE BE DOMINATED BY TODAY’S COMMODITY MARKET APPROACH? The second of two forces shaping the future evolution of the soybean market is the pressure for change in the commodity marketing system.. Therefore. One distribution system is focused on commodity crops. where the emphasis is on homogeneity. Projected growth in appetite is relatively robust with respect to population growth but is more sensitive to income growth. . The analysis of the effects of potential food price inflation (the market’s signal of a productivity shortfall) vividly documents that the impact of inadequate productivity falls upon the poorest of the world’s population. malnutrition intensifies in other areas of the world as well. Long-time lags typically exist between investment in research and the resulting gains in agricultural productivity. are heavily focused on the needs of customers in those regions. It is expected that many of the new value-added crops will be produced in larger volumes. With lower income growth. Even with optimistic income growth. Global economic growth is one of the key strategic issues for the soybean sector. it is natural for citizens and decision makers to underappreciate the need for continual investment in agricultural research. 3. the indicated appetite for animal protein (particularly in the China. strategies that heighten the industry’s role in humanitarian responses warrant careful consideration.al. With strong income growth. humanitarian need for food is likely to be a fixture of the next 25 yr. 2. although likely to still be significant. For moral and business reasons. the soybean protein complex has not been a significant component of humanitarian food responses.934 SONKA ET AL. In times of abundance. but has been utilized primarily for very small volumes. 4. With the growing attention placed on biotechnology and value-added crops.

and each grade is assigned a minimum test weight. After harvest. with an objective of maximizing yield of oil and meal.ECONOMICS AND MARKETING 935 19–3. the con- . the first handler receiving the crops is not interested in differentiating these grains for different end-uses. In this supply chain. emphasizing homogeneity. all of which are viewed the same. 2 soybean. Congress.5% protein. For domestic purposes. soybean processors crush large volumes of homogeneous soybean. The pricing of grains and oilseeds is dependent on these numerical grades. Because soybean is treated as a homogeneous product. Similarly. splits. one side effect of this structure is that knowledge creation tends to be concentrated within each segment in the chain rather than disseminated throughout the chain. The handlers in the traditional soybean supply chain typically have large volume storage units. it may not optimally meet the specific needs of any one customer. there are four numerical grades established. This traditional supply chain for soybean. the soybean is transported to soybean processors who crush (mill) the soybean into two components: soybean oil and soybean meal. while soybean meal is used in feed rations for livestock. 1989).S. In general. so differentiation before arrival based on protein content is not required. while export specification is almost entirely U. farmers produce generic soybean crops. The associated loss of efficiency at the customer level is offset by the considerable flexibility of supply offered by the commodity system and its low cost.5% protein and high protein meal which contains a minimum of 47. For example. much of the domestic and all of the international trade are based on specific tests that determine numerical grade. no. 1 soybean.S. This commodity orientation has important implications. Most soybean received at the processing facility can be crushed as they arrive or blended with stored soybean to produce either level of meal. and their profit is created by turning over a very large quantity of soybean at very small margins. For soybean. total damaged kernels. has been in place since the production of soybean in the USA began in earnest in the 1960s. More refined protein products can be created for human consumption. and maximum levels of heat damaged kernels. Soybean oil is then sold to food and industrial users. farmers deliver their grains to a first-handler or store them on-farm for later delivery. Whether delivered at harvest or from storage.1 The Structure of Today’s Marketplace Homogeneity is a fundamental attribute that has permeated the traditional soybean supply chain. but is interested in blending grains to meet physical limits for numerical grades in outbound shipments. First the capability to coordinate a large and diverse sector such as agriculture with minimal information flow throughout the sector has been a major strength of the sector. In the commodity value chain. However. This is one reason that commodity agriculture has been successful. large volume storage units are very efficient and commingling of a multitude of soybean cultivars does not influence the price received for transshipped soybean. foreign materials.S. no. There are two commercial types of soybean meal that can be produced: low protein meal which contains a minimum of 43. Although commodity output meets the general specifications of the customer at the next level. and soybean seeds of other colors (U. almost all soybean is traded as U. although produced from a choice among hundreds of cultivars.

the characteristics that are part of the grade factors often have little relationship to the grain characteristics that determine value to the end user. For example. and either delivers it directly for loading onto a container for export shipment. Commodity Identify preserved Societal objectives Large volumes Low cost Minimal quality standards Purchaser flexibility Small volumes Higher cost Specific quality standards Minimal flexibility Large volumes Low cost Specific quality standards Purchaser flexibility tract specification for soybean futures traded at the Chicago Board of Trade indicates that the deliverable grade is U. The identity-preserved supply chain typically consists of a specialty grain firm contracting cultivar-specific soybean production with farmers. with particular production and management requirements as contract terms. Table 19–7. The general desires . Substitution in an optimized system (if the optimal farm-level output is not available in sufficient supply) has been costly. An alternate supply chain exists in parallel to the homogeneous commodity market and is used for some differentiation of soybean. handling. Because of the biologic variability inherent in agricultural production. The farmer stores this production on farm. further restraining the use of such optimized systems. Generally. output levels can fluctuate both substantially and unpredictably. it has been much more difficult and expensive to coordinate identity preserved systems. and thus limits the opportunity to match the level of specific attributes available in different crop lots to the needs of different buyers. and segregation. Table 19–7 lists the relative strengths and weakness of the commodity vs. the identity-preserved system is focused on small-scale lots of high-valued soybean whose added value (compared to commodity soybean) is greater than the additional costs of production. societal events are pulling and technological changes are pushing our food systems to move to a differing set of alternatives. Historically. Until relatively recently.S. and even if a lower grade is received than contracted for. The emphasis on homogeneity drives the system toward average quality. Further a value chain optimized to use very specific farm output incurs the risk of restricted flexibility. However.936 SONKA ET AL. delivers directly to the tofu processor. #2. A key differentiating feature of this system is that decision making is administratively coordinated rather than being coordinated primarily through market price signals as is the case within the commodity market. even though the overall market signals for generic chicken suggest that demand is falling. identity preserved systems. therefore the portion of the crop marketed within this system has been relatively small. the goal is to minimize the number of handlings so as to reduce quality deterioration and to minimize the potential for commingling with nondifferentiated soybean. or delivers for direct loading onto trains for domestic shipment. particularly in markets for tofu and organic soybean. administrative coordination could result in increased consumer demand for a differentiated chicken product for Easter. the food marketing sectors were comfortable with the need to choose between these two relatively different approaches. Marketing system characteristics. There are appeal mechanisms in place if there are disagreements about quality delivered. In any of these cases.

such as products which lower cholesterol or which may reduce their risk of certain cancers. handling. technological change.S. Developments in information technology may soon provide the capability to efficiently capture by electronic means the relevant activities related to the production. Information on production activities on individual grain lots is lost when these lots are commingled with other grain lots. and to deliver this information in a timely manner to end-users. Increasing consumer sophistication. infrastructure impediments and higher trans- . competition. requires an identity-preserved market channel. The enhanced consumer interest primarily involves three aspects of the foods they eat. or provide the information on production practices. 19–3. such as Argentina. Some consumers are willing to pay for foods with certain production characteristics. Whether the confluence of these factors will permanently and significantly alter the structure of U. this market structure does not provide consumers information on the production. such as organic foods. such as isoflavones in soybean. soybean with that attribute may need to be segregated throughout the market channel to retain their value. are putting pressure on the traditional production and marketing practices in agriculture. Paraguay. food safety. The primary U.S. Improved processing technologies enable the refinement or capture of desirable attributes. and processing of identity-preserved crops. Another force for change is increased competition from South America. which independently and combined. The ability to supply either the attributes that provide the health or nutritional component. health issues. competitor in the global soybean market is Brazil. Although the commodity market structure has.ECONOMICS AND MARKETING 937 of the market are listed in the third column of Table 19–7. In both cases. New measurement technologies allow for identification of specific attributes in grains that can be rapidly measured at first delivery. or will result only in incremental changes has not yet been determined. environmental concerns. supplied safe foods to consumers. It is intriguing that this set of desires is inconsistent with both of the traditional alternatives. agriculture. Consumer sophistication has resulted in interest in foods that go beyond traditional concerns of price and presentation. Consumers also have expressed interest in foods that improve their health. in the main. Historically. and Uruguay. including oil and protein in soybean. Technological innovation also has contributed to the pressure to initiate alternative market channels. and processing activities that occurred during the transformation of raw crops into finished consumer goods. if these concerns lead to emphases on tracking and traceability of raw grains as they are produced and transformed into products. and perceptions associated with particular production practices.2 Market and Social Forces for Change There are many forces. handling. Recent concerns of bioterrorism and agroterrorism potentially could put additional pressure on the commodity market structure. regardless of whether these foods are actually more “safe” than what it generally available. Consumers want assurance that the foods they eat are safe. How each of these forces may influence commodity agriculture is discussed below. and biotechnology are some of the factors that are influencing today’s agricultural marketplace. although soybean production has grown in many South American countries.

and location of input applications. To date.. The next generation of genetic modification is focused on output traits that are intended to alter end-use characteristics to make soybean products healthier. Although it was anticipated that the “first generation” transgenic soybean. that is. 19–4 THE SOCIAL CONSTRUCTION OF ALTERNATIVE MARKETS An initial consideration of how rapidly commodity market channels will change to identity-preserved market channels frequently focuses on only the additional costs incurred in segregating and handling value-added goods vs.938 SONKA ET AL. The incorporation of these traits into soybean has no known effect on the end-use characteristics of soybean. However. Similar efforts to substantially enhance Brazil’s information and coordination infrastructure might allow that system to respond more effectively to pressures to change away from reliance on the traditional commodity approach. quantities. which differ from either of the existing primary systems. where the quantity of inputs applied to a given area of land is matched to the productivity needs of that land (National Research Council. this data also could be used in identity-preserved systems to verify when and where specific production and harvest activities took place. The next section will present a model of the social construction of alternative market channels. Efforts to improve road and river transportation. Desires for reduced use of fertilizer and chemical inputs have led to new production practices based on precision agriculture. If the development of identity-preserved market channels were depend- . if the number of producers embracing precision agricultural activities increases. 1999).al. Identity-preserved supply chains. could enhance Brazil’s competitive position. While the emergence of precision agriculture practices was driven primarily to increase profitability for producers. today the commodity marketing channel is not a sufficient supply chain for all international markets. such as resistance to herbicides or insects. The application of biotechnology to agriculture also may profoundly change the reliance on commodity marketing channels. will be required to maintain the value of these modified soybean cultivars throughout the marketing channel. portation costs have been a competitive disadvantage for Brazilian producers. commodities. such as modified oils. 1997). Societal concerns regarding the impact of agricultural practices on the environment also may influence whether alternative market channels will develop for soybean. as well as information on yields during harvest. In fact. the information collected also might contribute to the development of alternative identity-preserved market channels (Sonka et. biotechnology has been focused on developing soybean with transgenic input traits. It might be anticipated that the linkage of this information with value-added soybean might first occur in the high value-added identity preserved system currently in place. One result of precision agriculture is that more knowledge is created about each land unit. the international trade environment for transgenic soybean has become much more complex. or processing values. and information is recorded regarding the timing. such as their protein and oil levels. would be marketed using the traditional commodity supply chain. soybean modified with input traits. if successful.

as an important element of the rollout of biotechnologies.ECONOMICS AND MARKETING 939 ent solely on the sum of these additional costs. since it impacts the producer’s use of inputs such as herbicides or pesticides. are altered to make the soybean more valuable in various enduses. ex ante. The second application of biotechnology is the alteration of output traits. but also extending to Japan and other countries). immediate level. identify how the soybean can be segregated throughout the supply chain. since these soybean do not affect value to the end-user and therefore are not physically differentiable from nontransgenic cultivars. although costs are clearly a factor in the development of identity-preserved market channels. will agronomic trait-transgenic soybean be marketed in the same market as nontransgenic soybean? Will the markets be distinct despite the fact the soybean is homologous in processing? Will there be distinct. then it would be a fairly simple exercise to determine under what scenarios identity-preserved channels would develop. these uncertainties have profound economic consequences for buyers and sellers in the supply chain. There are many unresolved issues in the transactions between firms in the production and marketing of soybean. where the chemical components of soybean. New output traits would follow as the technology developed. For example. Roundup Ready soybean was developed to allow the producer to use Roundup herbicide to kill a broad spectrum of weeds effectively and at lower total cost without destroying the soybean plant itself. Will nontransgenic . Traditional supply chains were envisioned for distribution of input traittransgenic soybean. In the long-run. However. some or all types of transgenic soybean may need to be segregated from nontransgenic soybean. reliance on only costs will not help us realistically anticipate the potential for change. This was seen by holders of biotechnology patents. after the market—buyers and sellers—had become accustomed to the technology through the use of seeds with the altered input traits. and evaluate whether existing testing technologies can ascertain if the soybean they receive is transgenic. with positive environmental impacts. Input trait biotechnologies arrived to market first. perhaps. This type of application is referred to as an input or agronomic trait. This section will introduce and describe a social construction model that incorporates a richer set of parameters necessary to better understand the array of possible outcomes for commodity markets. separate markets for output trait-transgenic soybean. In this setting. firms must identify which of their customers require nontransgenic soybean. Producers would adopt the transgenic crop for economic reasons. The short-term impact of this international resistance to transgenic modification is primarily confusion across the soybean marketplace. The application of biotechnology to soybean was expected to increase the value of the crop to growers and processors. through the development of soybean cultivars with preferred agronomic characteristics and intrinsic product attributes. protein or fatty acids. with the recent development of international concerns about the basic technologies of transgenic crops (particularly in Europe. such as oil. However. Transgenic input traits did not affect the use value (in processing or consumption) of the product since its nutritive attributes remained the same. and the social groups that may influence the final outcome. or will there be some simpler aggregate market where all attribute combinations for soybean will be treated in common? At a practical.

940 SONKA ET AL. K. or whether a continuum of market channels will be developed will eventually be answered in the marketplace. and M. J. the “personal computer market”. Rosa. or the “automobile market”. Bender.). each of these markets had to be socially constructed.S. segregation requirements. Diss. soybean command a price premium? What is the liability for delivering contaminated (mixed) loads and can one be insured against this liability? How will technologies for sampling and testing. August) use the terms artifacts and attributes in their model of market evolution. and suggest that artifacts can be differentiated based on differing “conceptual clustering of attributes”. This conceptual clustering develops over time through social interactions between buyers and sellers who develop shared knowledge of the artifact. Likewise.S.L. That is. we must remember that all markets are social constructions. A. consumer’s longer-term reaction to genetic modification in the food supply is uncertain. the market boundary is fixed. Today. 1997. Whether or not the international resistance to transgenic soybean continues for years to come. 2001. Product and exchange of attributes in defining boundaries for value-added corn and soybean markets. (J. However.D. as are the buyers and sellers. of Illinois at Urbana-Champaign. even the markets that we now take for granted. Saxon. As White suggests. 19–4. or fades because of diminished interest. Copenhagen Business School. the artifacts that are socially constructed by buyers and sellers are complex constructs of multiple attributes: products. and labeling be introduced into the market—as mandatory or voluntary programs? The longer-term impact from consumer and political resistance to transgenic soybean is by no means apparent today. 2001. currently is not known. we routinely speak of the “corn market”.2 The Market Construction Process The question of whether the dominant marketing system for the heretofore homogeneous soybean can accommodate transgenic soybean. will be “constructed” as we watch. America’s family vehicle: The minivan market as an enacted conceptual system. Porac. “Building a market is a conflict-ridden and erratic process with quite a range of outcomes possible in the form of market schedules” (p. Drawing upon the literature of social construction of markets allows for informed speculation regarding the dynamics likely to emerge relative to agricultural commodity markets (Bender and Westgren. which ultimately allows .F. Unpublished Ph. 520). However. These are markets where products are well defined. However. Univ. Selected scholars who study organizational behavior within firms and industries examine the process by which markets emerge and develop. What the answer will be. Paper prepared for the Multidisciplinary International Workshop on Path Creation and Dependence. the U. whether it must eventually be replaced by a plethora of smaller markets that bear some resemblance to the small-volume identity-preserved markets that now exist. at some point in time. thus. as White (1981) warns. the construction of a new market such as the one (or several) in which transgenic soybean will change hands is an uncertain process. Conceptual clustering leads to stable definitions of artifacts. and the path that leads to that answer. is mitigated by some form of bilateral agreements or World Trade Organization (WTO) negotiations. Porac et al.

In their terminology “stable product conceptual systems are an intersection of understood attributes and usage conditions shared across the market divide. Their attempts at purposive action are instead embedded in concrete. ongoing systems of social relations.” where the social construction process articulates between the collective behavior of buyers and the collective behavior of sellers around product attributes (Fig. To analyze the social processes around the development. and solutions that shape a technological artifact (product). consumers. and how this stabilization may differ across social groups. However. 487) Pinch and Bijker (1987) model the particular case of the social construction of technology.” Granovetter (1985. p. processors. Pinch and Bijker (1987) indicate that closure to problems arising from artifacts may arise in two forms: rhetorical closure and closure by re- . consensus must extend beyond local transactions between farmers and country elevators to include domestic and international merchandisers. “Actors do not behave or decide as atoms outside a social context. one must identify the relevant social groups. nor do they adhere slavishly to a script written for them by the particular intersection of social categories that they happen to occupy.” In the complex global market for soybean and derivative products. and regulatory agencies. a stable product market exists to the extent that there is an equilibrium consensus in core attributes and uses for artifacts considered to be members of the market. codification. 19–14). 19–14 omits an important set of social processes that affect the process. for artifact transactions to extend beyond the initial set of producers and sellers to others diffused in time and space. Fig. and acceptance of a new technology. Source: Porac and Rosa (1996).ECONOMICS AND MARKETING 941 Fig. A model of market construction. problems. The mapping of the development process of a specific technology provides the opportunity to observe if and when artifacts stabilize. 19–14. the market is embedded in a social context broader than just the market transaction. That is. Markets for artifacts (products) evolve across what Porac and Rosa (1996) call the “market divide.

In their representation. Given the importance of network ties to social construction.. path dependence and path destruction will have eliminated some feasible and infeasible solutions. problems. Consumers can opt for soy foods labeled as nontransgenic and avoid the risk. Figure 19–16 includes one refinement of the framework designed by Pinch and Bijker (1987): the inclusion of links among social groups. as will problems that are redefined. Fig. For example. The framework presented by Pinch and Bijker (1987) uses a set of diagrams to show the connectivity among artifacts. 1996). genes “escaping” into wild species) are left behind in search for a solution to feed the world’s malnourished. This should be some comfort to those who see the current state of transgenic-market development as chaotic and intractable. consideration must be made as to whether the social groups are interlinked (Uzzi. Closure by redefinition of the problem occurs through a shift in focus to another problem. whether or not the problem has actually been solved. and solutions is diagrammed in Fig. there are many more elements that are being “tested” cognitively by parties on both sides of the market divide than will appear as closure is reached. an artifact is the central feature of the diagram. Network of an artifact and social groups. A schema of the relationship between an artifact. This would occur if the concerns about environment hazards (e. definition of the problem.g. Rhetorical closure occurs when the relevant social groups feel that the problem has been solved. social groups. and solutions. . Early in the social construction process. perceived problems. At closure. even though the risk may still exist in the transgenic foods. a strict government labeling requirement for products containing transgenic soybean may force rhetorical closure on the discussion of possible health risks. 19–15. multiple social groups. with links to different social groups (Fig. 19–16. Problems with solutions will become subsumed and no longer be part of the rhetoric. 19–15).942 SONKA ET AL.

producers of soybean with the political and cultural embeddedness in the social discourse of governments. and solutions. scientists. institutionalized market for homogeneous commodities will be a likely platform for construction of a market for transgenic soybean. problems. Central among these is that the existing. the market channel must develop a system of physical separation. . That is. the analysis of the cultural and political landscape of the biotechnology controversy above is the context in which buyers and sellers socially construct the rules of exchange. if substantive equivalence is granted between transgenic and nontransgenic cultivars. 19–4. The commodity market is well understood and many of the social groups involved in domestic and international commerce in soybean and other commodities have a stake in it as an artifact. Otherwise. consumers. Revised network between an artifact. then a soybean market driven by homogeneity—the commodity market—can exist. To the extent that some jurisdictions require identification and labeling of transgenics. the commodity market offers a single solution: all soybean must be considered as transgenic. 19–16.2 Application to Soybean Markets Some inferences can be drawn about possible pathways into the future for the transgenic problem from reading ex post analyses of other socially constructed markets and technologies. Their stake in the commodity market artifact also links these social groups in a network that should facilitate communication. organize stakeholder power. social groups. and thereby speed up the cognitive processes on both sides of the market divide.ECONOMICS AND MARKETING 943 Fig. and environmentalists.S. The pathway towards social construction of the transgenic soybean market(s) will be chosen in a complex process that balances the structural embeddedness of the commodity market among merchants and U. For example.

they must do so in a way that conforms to the social and political constraints in which these choices are embedded. the separation of transgenic and nontransgenic sources of soybean may be unnecessary and artificial. We are early in the social construction process and the alternative pathways to the eventual socially constructed market(s) are not clearly . Nonetheless. and solutions. problems. Fig. 19–17) that creates separate markets for separate socially constructed artifacts: transgenic and nontransgenic soybean. 19–17. homogeneous commodities. social groups. As buyers and sellers of soybean and other products that may be transgenic choose solutions across the market divide that meet their particular requirements. if labeling and segregation are required for transgenics by enough end-users in enough jurisdictions. Markets are not developing solely on the basis of atomistic behavior. For other consumers. which may be augmented by regulation. we likely will see path destruction of the artifacts that tie transgenic soybean to undifferentiated. The frequency of occurrence of a given problem or solution both within and across social groups may help identify the priority with which these problems or solutions are considered in reaching closure. Partial representation of the transgenic soybean artifact.944 SONKA ET AL. For some consumers this is the minimal requirement to establish normative legitimacy. and by the interrelationships among social groups. both labeling and additional testing or regulations are potential solutions that are identified for multiple social groups concerned with a particular problem (adverse health effects of transgenics) as well as solutions for different problems across social groups. their tolerance for commingling may be effectively unlimited. and regulation (Fig. oversight and testing. For example. The construction of the transgenic soybean market is influenced by the relationship of many social groups with the artifact of genetic modification.

Although the controversy regarding transgenic crops is one force encouraging traceability. identity-preserved system. • The demand for public oversight or certification of identity preserved systems is increasing. when in place. or could even choose to develop a U. Such pressure raises the potential for further decline in the proportion of the world’s soybean crop that is marketed as a commodity. • Internationally the demand for food system traceability is intensifying.S. However. environmental concerns. The current identity preserved market channels tend to be privately developed and implemented. and the state of the system capability that exists to track and deliver agricultural products. and advances in information technology have the potential to interact in complex ways to fuel or retard change. The USDA has moved to certify private testing labs to provide laboratory clientele with assurance of laboratory results. Social concern regarding transgenic crops is a key factor in some markets and locales. the associated operating costs. Some may be foreclosed as a result of recent political choices on labeling. operate at low cost. But it is important to remember that genetic modification of soybean is only one of several factors that are themselves interacting to pressure agricultural commodity markets to evolve to new states. The European Union has proposed requirements that would require traceability of soybean imports as to whether they are transgenic or not. If traceability requirements are implemented and adopted widely. it is only one among several forces.ECONOMICS AND MARKETING 945 demarcated. but in many jurisdictions the political and cultural discourse is far from complete. broader forces such as food safety. then significant adaptations will need to be made to agri- . Traditional identity preserved marketing systems were limited in scale in large part because of the coordination technologies available. 19–4. • The growth in market structures to deliver value-added crops will be determined by the potential value gained. Advances in information technology and managerial skills offer the potential to create such systems which are scaleable and. Events in society and in the laboratory that will happen tomorrow will interact with our current state of acceptance to forge the dynamics that will lead to acceptance or not in the various regions and markets of the world. Evaluation of the current situation in the context of social construction yields the following four insights: • The pressure for increased differentiation of crops at the farm level comes from several interacting sources. These new states are being socially constructed at this time.4 Summing Up Speculation as to the future course of societal acceptance of transgenic agricultural products is indeed speculation. The USDA might pursue certification of private identity preserved processes if there is demand for public involvement in identity preserved systems.

however. Reductions in income growth from levels consistent with those of the latter part of the 20th century would significantly curtail the effective market demand for protein. Western Europe. Although the USA. Much of that growth would occur in Asia and other parts of the world where lower income consumers would expend additional income to enhance their diet. For many years. As the sector moves through this period of turbulence and potential change. Often. relatively little growth in demand is expected there. when times are favorable. if at all. The availability of soybean oil and meal allowed consumers to enhance their diets and level of well-being. the effective global demand for protein should continue to expand. significant numbers of malnourished are likely to exist in Africa even with optimistic income growth.946 SONKA ET AL. The future soybean marketplace will be determined by the complex interaction of many forces. however. Now. examination of the costs of inadequate productivity (measured in terms of inflation in food prices) shows that inadequate productivity has dire human costs. Although the number of malnourished is negatively correlated with general income growth. agricultural productivity and the investment in research needed to maintain productivity diminish as priorities. The involvement of public oversight or certification can further fuel or retard change. With income growth. Today we cannot discern how those pressures will eventually effect the soybean production/marketing system. the commodity market system has effectively served consumers and the soybean industry. of which the controversy over transgenic crops is just one. The growth in soybean production and consumption over the last 30 yr is impressive for an agricultural commodity. The world’s poor and near-poor bear the primary burden of shortfalls in productivity through decline in diet quality and increase in the number of malnourished. The soybean market (and numerous similar agricultural markets) is experiencing the type of turbulence that is referred to as social construction of markets. However. . scrutiny of four key concepts may offer insights as to the eventual form and character of tomorrow’s soybean market. These pressures may continue even if the societal concern regarding genetic modification of soybean were to diminish. numerous forces (including social concerns regarding transgenic crops) suggest that the homogenous nature of the commodity market is no longer adequate. 19–5 SUMMARY This chapter described today’s marketplace for soybean and examined key forces likely to shape the soybean marketplace of tomorrow. The current move towards demanding traceability in European markets has roots that extend beyond concerns regarding genetic modification and are likely to persist even if those concerns were to dissipate in the future. The pressure for differentiated farm output comes from several interacting forces. Two of those forces will be the effective demand for protein and the nature of the production/marketing system for soybean. and Japan would remain as significant markets. Global income growth is not assured. The eventual change in the market will occur as potential benefits are weighed against operational costs and the state of the information systems that underpin the market. cultural marketing systems.

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