The world soybean market consists of many closely substitutable commodities, such as rapeseed, sunflowerseed, and cottonseed. Exporting countries can also process oilseeds domestically and ship the resulting protein meal and vegetable oils to foreign buyers. Foreign import demand depends on the deficit between countries' domestic oilseed output and consumption. Divergent requirements for protein meal and vegetable oil, as well as limits on domestic processing capacity, determine the ratio of oilseeds to oilseed products that countries will import. The volume and source of foreign imports depends on seasonal availability and relative prices, credit and delivery terms, local preferences, and quality. Country policies, such as tariffs and domestic subsidies, also can affect prices and the availability of competing products. The Foreign Agricultural Service (FAS) monthly report Oilseeds: World Markets and Trade presents forecasts and historical data by country for the major oilseeds and their products, covering production, domestic consumption, and international trade.

U.S. exports and imports
The United States is the world's largest producer and exporter of soybeans. Oilseed and oilseed product exports, particularly soybeans, represent a significant source of demand for U.S. producers and make a large net contribution to the U.S. agricultural trade surplus. Among all U.S. agricultural products, only grains and feeds outrank the oilseed sector in total export value and net exports. In 2000/01, soybean and soybean product exports amounted to 43 percent of U.S. soybean production, and the total value of U.S. oilseed and oilseed product exports was $8.8 billion. Outlook for U.S. Agricultural Trade provides the latest information on U.S. farm exports, by commodity and region, as well as the trade outlook. Current U.S. export sales of soybeans, soybean meal, and soybean oil are tracked by destination on a weekly basis.

Main export destinations for U.S. oilseeds, oilseed meal, and vegetable oil include the European Union (EU), Japan, Mexico, China, and Taiwan. Other important markets include South Korea, Indonesia, and Thailand. The Philippines, Saudi Arabia, and Venezuela also import significant quantities of U.S. oilseed meals. U.S. vegetable oil exports are more dispersed and are heavily influenced by concessional food aid to developing nations through such programs as P.L. 480.

U.S. imports of oilseeds and oilseed products amounted to $1.7 billion in 2000/01, and are mainly rapeseed and rapeseed products from Canada, olive oil from Western Europe, and tropical oils from the Philippines, Indonesia, and Malaysia. The Foreign Agricultural Trade of the United States (FATUS) database can be used to search for statistics on U.S. exports and imports of oilseeds and oilseed products by country or region.

Despite substantial growth in oilseed and oilseed product output in the past 25 years and recent gains in export volume, the U.S. share of global exports has steadily diminished. In the mid- to late 1970s, the United States dominated world trade in unprocessed oilseeds, with a market share of more than 70 percent. Recently, this figure has fallen below 50 percent. From a smaller percentage base, the U.S. has seen its share of oilseed meal and vegetable oil exports decline even more sharply, particularly before 1990.

Why the decline in U.S. share of global exports? A key development has been the phenomenal growth of foreign soybean output and exports, particularly by Brazil and Argentina. Foreign soybean output now exceeds that of the United States, and Brazil and Argentina currently share approximately 30 percent of the soybean export market, up from less than 15 percent before 1980. With increased foreign production, and more rapid expansion of trade in soy products than whole beans, Brazil and Argentina have each surpassed the United States in soy meal and soy oil exports. Another factor is the recent expansion of U.S. meat exports, thereby increasing domestic meal use rather than contributing to exports of soybeans or soybean meal. Brazilian and Argentine soybean and meal exports are projected to capture market share from the United States in the next decade.

Major foreign soybean exporters and importers
Since the early 1970s, soybean production in South America has expanded rapidly. Brazil now trails only the United States in soybean production. Brazilian soybean growing regions used to be concentrated in the south, relatively near the major ports. In recent years, soybeans have expanded into the vast farmland of the center-west states, as infrastructure improvements have cut internal transportation costs. Brazil's vast reserves of farmland will permit significant expansion in soybean area as prices strengthen. Argentina's soybean growing regions and crushers are located close to port facilities, and the relatively small domestic market makes it the world's largest exporter of soybean meal and oil. Recent increases in international competitiveness by Argentine and Brazilian grain and oilseed producers could foreshadow continued gains on the strength of abundant undeveloped agricultural resources, increasing market orientation, and expanding global trade liberalization.

China is the world's fourth-largest producer of soybeans. The major Chinese soybean growing regions are in the northeast part of China. Yet, rapid growth of China's economy has spurred food consumption, turning the country into a leading soybean importer. Changes in China's agricultural and trade policies have greatly influenced world oilseed markets. China's WTO accession will further reduce import barriers to its oilseed market.

The major Indian soybean growing region is in the central state of Madhya Pradesh. Soybean production in India has increased in the last decade, although yields are among the world's poorest. India imposes prohibitive barriers on oilseed imports, so its domestic crushing is limited to the oilseeds that can be produced within the country. Domestically produced soybeans are highly valued for the vegetable oil, as India is the world's largest vegetable oil importer. India is a much smaller consumer of soybean meal, and exports its surplus to other Asian countries.

The European Union is self-sufficient in vegetable oil production, but its protein deficit still makes it the world's largest importer of soybeans and soybean meal. Since the 1960s, EU imports of soybeans swelled because of rapid growth in livestock production and duty-free concessions signed in world trade agreements. But in the 1970s and 1980s, soybean consumption slowed as EU agricultural policies subsidized a large expansion in domestically produced rapeseed and sunflowerseed, eroding the market for oilseed imports. The U.S. government challenged these subsidies and, in 1992, the EU committed to a number of reforms of its Common Agricultural Policy (CAP), including area limits on the planting of oilseeds. Incremental reductions in oilseed subsidies and lower prices stemming from further CAP reforms have caught up to EU farmers, who recently scaled back oilseeds planting. Direct payments to oilseed producers have declined over the last 3 years and now equal the payments received by grains producers.

In coming years, EU enlargement and CAP reform are projected to swell internal grain supplies and allow EU grain prices to fall even more. Despite low protein-meal prices, the comparatively larger reduction in the cost of feeding grains to livestock should curb EU soybean meal consumption and imports. Historically, high import tariffs on cereals have boosted EU consumption of soybean meal, which has been favored by duty-free access for soybeans. Over the last decade, lower grain prices and a declining euro together with several animal disease epidemics resulted in significant increases in the feeding of grains and oilseed meals and a reduction in the feeding of nongrain feed ingredients, such as sugarbeet pulp and fish meal.

Under the North American Free Trade Agreement (NAFTA), Mexico immediately reduced its soybean tariff to 10 percent, which will be phased out completely by 2003. With reforms in Mexico's domestic crop support programs, imports have virtually displaced domestic soybean production, with nearly all imports coming from the United States. U.S. soybean exports to Mexico have doubled since 1993. Strong growth in the incomes of Mexican consumers has boosted consumption of meat and vegetable oils and increased demand for soybeans. Improvements in Mexico's rail links at the border have also expedited soybean trade.

Trade policies
Compared with trade in other agricultural commodities, trade in whole oilseeds, particularly soybeans, is relatively unrestricted by tariffs and other border measures. But oilseed meals, and particularly vegetable oils, typically have higher tariffs. Applied tariffs on soybean oil, for example, average about 20 percent for the world's top importers of the commodity, compared with rates generally at or below 10 percent for soybeans. Agricultural tariff schedules for World Trade Organization (WTO) member countries report the current duties.

Both exporters and importers have used other trade-distorting policies, such as differential export taxes in Argentina and in Brazil (prior to 1996), or production subsidies such as those in the EU. These policies create incentives to boost domestic oilseed production or encourage exports of processed products, which tend to displace U.S. oilseed exports and shift the composition of U.S. exports towards whole oilseeds and away from higher value-added oilseed meals and vegetable oils.

The WTO recently launched new negotiations on agricultural trade. Negotiations will likely focus on issues previously addressed by the Uruguay Round Agreement on Agriculture (URAA). URAA placed limits on tariff and nontariff barriers to trade, export subsidies, and the type and level of spending by countries on domestic agricultural support programs. These provisions limit member countries' use of trade-distorting policies. U.S. objectives for future negotiations include further reducing tariffs and improving market access, eliminating the use of export subsidies, and further limiting trade-distorting domestic programs. Analyses of U.S. tariff rate quotas for peanuts have also shown their significant influence on U.S. peanut imports.

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page updated: September 26, 2002