U.S. soybean crush capacity may swell by as much as 30 per cent over the next four years, with more than a dozen planned new facilities or expansions that are part of a nationwide wave of investment in processing the main U.S. export crop, largely to supply vegetable oil to renewable diesel makers.

The surge would upend traditional trade flows as exports of whole soybeans to markets like China give way to more domestic demand and greater overseas shipments of soymeal, a product that China typically does not import.

Nowhere will this shift be more stark than in North Dakota, the No. 4 U.S. soy state by planted acres, which ships about 70 per cent of its harvest of the high-protein oilseed to China annually. Instead, the new facilities will be able to process half of the state’s soy harvest into oil for biofuel and meal for livestock feed.

Although China has imported more U.S. soybeans this year after a smaller-than-expected 2022 South American crop, the world’s biggest soy buyer has been relying increasingly on Brazil for its soybean needs.

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Meanwhile, U.S. biofuel makers are seeking more plant oils like soyoil to produce renewable diesel as demand for lower carbon fuels surges.

But soymeal demand growth has lagged, foreshadowing a glut of the feed ingredient unless markets are expanded.

Crushing it

Weather-beaten concrete grain silos tower over the tiny town of Spiritwood, located along BNSF Railway’s main line that links North Dakota’s farms to export terminals in the U.S. Pacific Northwest.

Here, global crop merchant Archer-Daniels-Midland and Marathon Oil are building a US$350 million crush plant where a barley malting plant once stood. The Green Bison Soy Processing LLC facility is slated to open in late 2023.

The crush plant will draw soybeans from farmers 100 kilometres in each direction, said Mike Keller, vice-president with ADM.

It may also prompt growers to plant more of the oilseed instead of wheat and barley, and transform crop marketing plans and grain flows in the state, farmers and analysts said.

Monte Peterson, a farmer in Valley City about 40 km from Spiritwood, expects to store more soybeans on-farm once the plant opens. He plans to time his sales selectively instead of shipping them all at harvest time when prices are normally lower.

“With crush capacity building here, farmers are going to be storing more soybeans to ship 12 months out of the year,” said Peterson.

All the soyoil produced in Spiritwood will be shipped to a Marathon plant in Dickinson, 320 km west, to produce renewable diesel, a lower-carbon biofuel that can be used interchangeably with petroleum-based diesel.

The final destination for soymeal is less certain. ADM said this summer that it is initially targeting livestock and poultry producers around the region, and expects exports to ramp up in coming years. U.S. Department of Agriculture trade missions and industry groups have targeted some buyers, but growing markets will take time.

Exporters will look to increase sales to southeast Asia and Europe, and possibly displace shipments from top supplier Argentina in markets such as Australia and New Zealand, said John Baize, president of consultancy John C. Baize & Associates.

Export expansion

U.S. grain exports have been reaching global buyers for decades via Gulf Coast and Pacific Northwest terminals. But most existing export facilities there were built to move dry whole grain, not processed products like soymeal, which can clog grain handling equipment.

Some Gulf Coast exporters employ smaller mid-river rigs that unload barges directly onto ocean-going ships.

One meal-focused terminal at the Port of Grays Harbor in Aberdeen, Washington, owned by farm cooperative AG Processing, is working to double its export capacity to six million tonnes annually by 2025.

The U.S. Maritime Administration approved a $25.5 million infrastructure grant last month for export terminal expansion. U.S. soybean farmers and industry groups pledged an additional $1.3 million to help offset design and development costs.

“AGP’s expansion project at the Port of Grays Harbor is arguably the most immediate opportunity for soybean farmers to assist with the need for increased soybean meal export capacity,” said Mike Steenhoek, executive director of the Soy Transportation Coalition.

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Among the first out of the gate was a group in western Manitoba, that last year commissioned a feasibility study on the concept of building the plant in that region.

Initially the thought might not seem to make sense — after all, most of the province’s still-small soybean harvest comes from the Red River Valley.

However, this group of business, farm and civic leaders point out the crop is escaping that cradle and steadily marching westward. The region also offers a ready and growing market for soybean meal in the hog sector, they add.

News of the upstarts, it would appear, hasn’t been well received in the spiritual and physical home of soybean production in Manitoba. Many in the Red River Valley point out the lion’s share of the acres remain here and are likely to for the foreseeable future.

Inevitably the Manitoba Pulse and Soybean Growers Association has been pulled into the rivalry, with some quietly suggesting MPSGA has a clear preference in location. The perception has grown strong enough that MPSGA has publicly clarified that, as an organization, it strongly supports building a plant, but remains agnostic about its location.

It’s inevitable that parochial sentiment would creep into any talk of plant location. But right now this looks like a serious case of putting the cart before the horse.

Most analysts will tell you that, for a modern plant of the size and scope necessary to be economically competitive, Manitoba’s total provincial soybean production needs to grow.

In his article, reporter Allan Dawson details that a 3,000-tonne-per-day plant is basically the bare minimum, with anything smaller than that struggling. Even a proposed North Dakota crusher, with a planned size of 3,400 tonnes per day, is considered to be “on the small side.” One plant currently under construction in Brazil is set to process 5,000 tonnes a day.

The nearby North Dakota proposal, which is the most helpful comparison, would absorb about 1.24 million tonnes of soybeans every year. Manitoba is expected to produce a grand total of 2.2 million tonnes of soybeans in 2017, according to StatsCan numbers from its August field crop report.

No company will want to be in a position where it is consuming half the available raw material in any geographic region. If soybean producers want to see a plant on the ground here, growing the annual acres, and protecting that expansion, is the important first step.

For farmers in Manitoba and Saskatchewan, that means agronomic research to perfect the production system for our climate, soils and weed and pest spectrum. It requires a concerted effort and groups like the MPSG are already well down that road, funding and directing research and doing extension work with growers.

Naturally, the association contributed to the WestMan study, as it has considerable knowledge and expertise in the sector; it should be at that table. It’s unfortunate this group, which represents the interests of all growers, has been tainted by the controversy.

As MPSG’s executive director Francois Labelle notes in the news story, the real truth is Manitoba isn’t competing with itself. The province is competing with other provinces, states and far-off countries such as Brazil and China.

He’s also correct when he notes the companies that build these plants are looking at where they’ll get their best return globally. The decision won’t be made in a boardroom in Manitoba; it will be based on finding the best fit for the company’s objectives. Sometimes, the factors that make that determination can be unexpected.

For example, Roquette chose to build its pea protein facility in Portage la Prairie, despite the fact this province produces very few peas relative to Saskatchewan.

Those familiar with the company’s decision say two factors that weighed in were Manitoba’s relatively low-cost hydroelectricity and the province’s robust French-speaking community, which is an attraction to the French company’s managers looking at relocation to North America.

Instead of descending into regionalism, the industry’s best bet is to make Manitoba an attractive destination for any new plant, which will in turn keep soybeans thriving here.

That’s going to require everyone in the sector pulling together, rather than drawing apart.

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“We want to see a facility built in Manitoba,” Labelle said in an interview Sept. 29. “That has been our position since we first started talking about this in 2014. We want to make sure Manitoba works together to make that happen. That’s what we need to have. There are different thoughts about how it should happen, but it’s really the builder that will decide (the location).”

The MPSG issued a news release last week with the same message, partly in response to rumours it has a preferred location.

Westman Opportunities Leadership Group (WOLG), which has the backing of the Keystone Agricultural Producers, MPSG and a number of municipalities, has been working for almost a year to build the case for a soybean-crushing plant in western Manitoba.

A Manitoba farmer tweeted Sept. 18 that he’d heard the MPSG board wanted a plant built in eastern Manitoba.

“OMG. Just build it! Help every MB farm’s basis!” the tweet read.

The rumour is wrong, Labelle said.

The MPSG represents all Manitoba’s pulse and soybean growers, chair Jason Voth said in a news release.

“The possibility of a crush plant is an encouraging topic and we’re working hard on the research and market development side to shed light on the correct path,” he said. “MPSG is sitting at the soybean crush table to make sure the plant gets built in Manitoba. We are not here to choose a specific location or take sides. We are involved because we have a deep understanding of the subject matter and are happy to share it.”

Even though soybean plantings and production have been growing dramatically in Manitoba more of both is needed to attract a plant, which would cost at least $400 million to build, Labelle said.

“I can’t expand on that enough,” he said. “Even though we are producing lots of soybeans we’re not in a position yet that somebody is going to jump out and build a plant.

“No company is going to buy all the beans, so you need a fair acreage.

• Read more: Manitoba soybean acreage now higher than red spring wheat
• Read more: Manitoba soybean yields disappoint

“I think one of the things people miss is it’s not whether it’s going to be built in Brandon, or Portage or Winnipeg or Altona that really counts. It’s whether it will be built in Manitoba, whether it will be built in China, whether it will be built in Brazil. When you spend $400 million you’re going to look where you get your best return in the world.”

However, Manitoba does have some advantages, including the demand for soybean meal from its hog producers, Labelle added.

In June the MPSG held a seminar “to deliver industry knowledge and expertise” to groups interested in a Manitoba soybean facility,” the MPSG said in its release.

The WOLG, agriculture consultant Mark Rowe and Manitoba Agriculture officials attended. Rowe had information on plant operating costs, energy demands and the high volume of processing required to be profitable.

“To go from a 2,000-tonne (a day crush) plant to a 3,000 it’s in the $10- to $15-a-tonne margin improvement,” Labelle said.

A proposed North Dakota soybean plant will crush 3,400 tonnes a day (1.24 million tonnes a year operating at full capacity), which is considered small. A 5,000-tonne-a-day plant is being built in Brazil, he added.

Earlier this year Manitoba Agricultural Services Corporation (MASC) estimated Manitoba farmers insured a record 2.3 million tonnes of soybeans. Assuming five-year average yields of 38 bushels an acre (1.02 tonnes an acre) that’s 2.3 million tonnes of production — not quite double the volume needed by a 3,400-tonne-a-day plant. But Manitoba soybean yields are expected to be slightly below average this year.

In May 2015 a study prepared for the MPSG and Soy 20/20 concluded Manitoba soybean production could sustain a 2,000-tonne-a-day soybean-crushing plant, in part because of poor and expensive rail service to export soybeans and import soybean meal.

Since then, rail service has improved and the grain industry hopes western Canadian-grown soybeans will be included under the maximum revenue entitlement, resulting in lower rail shipping costs.

Manitoba soybean plantings of just 18,419 acres in 2000, have exploded, increasing 125-fold.

Insured plantings nearly tripled in 2001 and increased again in 2002 and 2003, fell in 2004 and 2005, increased in 2006, fell in 2007 and since then have gone up every year.

Plantings this year were up 39 per cent from 2016’s record.

Last year average insured soybean yields in Manitoba set a record at 42 bushels an acre.

For many years soybeans have been Manitoba’s third-biggest crop behind canola and wheat, respectively. But MASC projects for the first time crop-insured soybean acres had exceeded insured acres of red spring wheat — MASC’s biggest wheat category, which covers varieties in the Canada Western Red Spring wheat class.

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“I think this just confirms to us that there is a significant potential here and I am quite sure we will continue to investigate and see where this leads us,” Allan Preston, co-vice-chair of the Westman Opportunities Leadership Group (WOLG), said Feb. 8 in an interview.

• Read more: U.S. soy grower co-op plans North Dakota crush plant

“Although there is due diligence to be done yet (on the proposed plant at Spiritwood) and there are no shovels in the ground, this lends credence to the fact that our soybean acreage throughout the northern Great Plains, on both sides of the border, is expanding north and west at a pretty phenomenal rate.

“This new facility will be about six hours from my house. That’s a pretty big radius. We are focusing considerably farther north and farther west from where this would be, so in essence they would not necessarily be competing for the same acres anyway.”

Minnesota Soybean Processors, a co-operative, announced Feb. 7 it wants to build a US$240-million 3,400-tonne-a-day soybean meal, oil and biodiesel plant in Spiritwood.

The company hasn’t raised all of the funding yet, but officials said they are optimistic they will start bringing in soybeans in the fall of 2018, Agweek reported.

Choosing a location allows the co-op to do a preliminary engineering and design study, which would determine the “feasibility of construction.”

The co-op said it will work with the North Dakota Agricultural Products Utilization Commission to complete the feasibility study.

Minnesota Soybean Processors began crushing soybeans at Brewster, Minnesota in 2003 and added a biodiesel operation in 2005.

“Our preliminary market analysis shows there are markets this facility would serve that would complement our current efforts at the Brewster facility to reach both global and domestic markets for meal and oil,” Minnesota Soybean Processors general manager Scott Austin said in a news release. “We also believe that the biodiesel from this plant would serve both domestic and international markets.”

The new plant would produce about 900,000 tons of soybean meal per year and 490 million pounds of oil. Half the oil produced would go to biodiesel and the rest to food-grade soybean oil.

Community leaders in western Manitoba have been thinking about the potential for a soybean-crushing plant for a while, WOLG chairman Ray Redfern said in an interview Dec. 22.

WOLG, whose volunteer members include business, farm and civic leaders from western Manitoba, was formed to investigate the idea. In partnership with the Brandon Economic Development Corporation they have hired EcDev Solutions to build a detailed work plan centred around “a strategic approach to assessing and, if applicable, pursuing the identified potential opportunity along with identifying funding sources for these efforts,” WOLG said in a news release. Funding for the preliminary work came from the Brandon Economic Development Corporation, with oversight by WOLG.

The WOLG investigation will be based on a hexane solvent extraction plant costing $60 million to $175 million.

Currently WOLG members are not investing to build the plant, nor are they soliciting investments, Preston said.

“What we are doing is laying the groundwork through the region and seeking out interest from various levels trying to get that solid foundation to make it an attractive situation to bring in a company that wants to build,” he said.

In May 2015 a study prepared for the Manitoba Pulse & Soybean Growers (MPSG) and Soy 20/20 concluded Manitoba soybean production could sustain a 2,000-tonne-a-day soybean-crushing plant, in part because of poor and expensive rail service to export soybeans and import soybean meal.

For several years soybeans have been Manitoba’s third-most-planted crop behind canola and spring wheat, respectively. Soybean plantings are expected to continue growing because of its profitability for farmers and ability to tolerate stress, including wet soil.

In 2016 Manitoba farmers planted a record 1.64 million acres of crop-insured soybeans, up 310,000 acres or 23 per cent from 2015, Manitoba Agricultural Services Corporation data shows. Moreover, the province-wide yield averaged 42 bushels an acre — exceeding the previous record of 38 set in 2013 and tied in 2015. As a result Manitoba farmers produced a record 18 million tonnes of soybeans last year.

Industry observers expect two million acres of soybeans this year. If the pace set the last five years continues Manitoba soybean plantings will hit three million acres by 2022.

Meanwhile, the local demand for soybean meal is expected to increase, Preston said.

“We see an expanding hog industry here in Manitoba and expanding demand for soybean meal hog rations,” he said. “The stars are aligned in a fashion that makes locating a plant somewhere in southwestern Manitoba still a pretty good idea.”

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The newly created Westman Opportunities Leadership Group (WOLG) is a volunteer group whose membership includes business, farm and civic leaders from the region.

“Most of the (soybean) growth from here on in will certainly be in Westman,” WOLG chair Ray Redfern, president of Redfern Farm Services, said in an interview from his Brandon headquarters Dec. 22. “That’s why we think Westman is a good location for a (soybean-crushing) plant.”

WOLG, has broad Westman region representation with everyone “pulling in the same direction,” he said.

WOLG, in partnership with the Brandon Economic Development Corporation, has hired EcDev Solutions to build a detailed work plan centred around “a strategic approach to assessing and, if applicable, pursuing the identified potential opportunity along with identifying funding sources for these efforts,” WOLG said in a news release. Funding for the preliminary work, to be completed by January 31, 2017, is coming from the Brandon Economic Development Corporation, with oversight by WOLG.

The longer-term objective is to determine if a plant makes economic sense, and if so, take that information to a crushing company in hopes it will build a plant, Redfern said.

The WOLG investigation will be based on a hexane solvent extraction plant costing $60 million to $175 million. It’s estimated such a plant will cost $1 billion a year to operate and employ 40 to 80 people, not including spinoff businesses, Redfern said.

Biodiesel made from soybean oil is one possible spinoff. Soybeans are primarily crushed for the meal, which is fed to livestock.

Growing importance

In May 2015 a study prepared for the Manitoba Pulse & Soybean Growers (MPSG) and Soy 20/20 concluded Manitoba soybean production could sustain a 2,000-tonne-a-day soybean-crushing plant, in part because of poor and expensive rail service to export soybeans and import soybean meal.

For several years soybeans have been Manitoba’s third most planted crop behind canola and spring wheat, respectively. Soybean plantings are expected to continue growing because of their profitability for farmers and ability to tolerate stress, including wet soil.

In 2015, Manitoba farmers seeded a record 1.33 million insured acres of soybeans, Manitoba Agricultural Services Corporation (MASC) data shows.

In 2016 soybean plantings jumped 310,000 acres or 23 per cent, to a record of 1.64 million acres. And industry observers expect a similar jump this year to two million acres. If the pace set the last five years continues Manitoba soybean plantings will hit three million acres by 2022.

The 2015 study suggested the best place for a crushing plant would be between Portage la Prairie and Winnipeg and Lake Manitoba and Carman because of the proximity to most of Manitoba’s soybean production, feed mills and road and rail corridors and being far enough away from northern U.S. crushers to have a freight cost advantage. However, MPSG executive director Francois Labelle noted the study was based on 2015 statistics and future soybean production and possible hog production, would be in western Manitoba.

In 2011, 95 per cent of Manitoba’s soybeans were grown in the south-central and eastern parts of Manitoba, including the Red River Valley and five per cent in the rest of agro-Manitoba, data from Manitoba Agriculture pulse specialist Dennis Lange shows. However, in 2016, 61 per cent of soybean acres were grown in the ‘traditional’ area and 39 per cent beyond that region.

Makes sense

With soybean acres growing, especially in the western part of the province and eastern Saskatchewan and the possibility of expanded hog production in western Manitoba where Maple Leaf in Brandon and Hylife in Neepawa process hogs, if a soybean-crushing plant is to be built the Westman region makes sense, Redfern said.

Soybean planting could “explode” in Saskatchewan following poor lentil and field pea yields there in 2016, he added.

“The genetics have been proven, at least to this point — potential frost notwithstanding,” he said. “The potential is there for reasonable success. The Parkland area (of Saskatchewan) has really had great success.”

Assuming a 5,000-tonne-a-day plant operates 350 days a year it would need 1.75 million tonnes of soybeans annually. That’s more soybeans than Manitoba has typically produced. Preliminary estimates based on MASC data puts 2016 production at an estimated 1.83 million tonnes (an average 42 bushels an acre from 1.6 million acres). However, Redfern said the feasibility study could take several years and acreage, including in eastern Saskatchewan, could be higher.

If Manitoba production hits three million acres, assuming the current five-year average yield of 35 bushels an acre, annual Manitoba soybean production could reach 2.85 million tonnes a year.

In July Keystone Agricultural Producers’ (KAP) advisory council passed a resolution supporting the Brandon Chamber of Commerce’s efforts to attract a soybean-crushing plant.

Some of WOLG’s volunteers include KAP members Owen MacAulay, Barry Routledge and David Rourke, all known as strategic thinkers.

Allan Preston, a former deputy agriculture minister, is also part of the group.

Redfern stressed the study must be thorough and fact based.

“We don’t want to be blown out of the water because we did a poor job building our case,” he said.

Taking a regional approach will pay off, he added.

“I am becoming more and more convinced that this is all about us making sure the community is on common ground and not islands, all competing with each other. We will be far more successful if we embrace collectively that there is going to be some benefit to all of us wherever we fit in this chain.”

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That prompted Keystone Agricultural Producers members at their recent summer advisory meeting here to support the Brandon Chamber of Commerce’s efforts to encourage industry to construct a soybean-processing plant in the region.

“I advocate for any value adding that we can add to the province. I think that it is good for farmers and if there is the opportunity with the Brandon Chamber of Commerce to advocate on behalf of this, I think we should (support the resolution),” said Dustin Williams, a Souris-area producer who moved the resolution.

“With the expanding soybean acres in Manitoba and probably into Saskatchewan here shortly, I think Brandon is a good region for this and I think that it is fitting that we are here today in Brandon to pass this resolution,” said seconder Simon Ellis, who farms just north of Wawanesa.

The Brandon Chamber of Commerce had been advocating to attract the development of a processing facility two years ago.

“I think the resolution that was adopted at the KAP meeting was based on a project that was undertaken a few years ago. There hasn’t been a lot of activity on it at this point,” said Terry Burgess, Brandon Chamber of Commerce president. However, Burgess says they are happy to see any commitment by KAP to support growth in the region.

“The desire to encourage agribusiness in WestMan and in Brandon is truly appreciated. I think collectively if we can put our heads together and work together, perhaps we can make a difference on some of these larger projects,” Burgess said.

Debating location

While the idea of a processing plant had general support, the location didn’t necessarily.

“I would like to support this resolution, my problem is, what about Carman? What about Winnipeg? What about Dauphin?” said Ernie Sirski of Dauphin, who was also a director of the Manitoba Pulse and Soybean Growers. “I want this soybean-crushing plant to be in Manitoba. That is my first and foremost, but I will have trouble supporting this resolution with a named location.”

Williams, who spoke on behalf of KAP’s District 7, said they aren’t necessarily tied to the Brandon location but rather saw movement on the project by the Chamber of Commerce and wanted to get behind it.

“Our thinking was that because the Brandon Chamber has had movement on this that we should align with it rather than try to create a grassroots movement to put it somewhere else in the province,” Williams said.

MPSG support

In an interview, Manitoba Pulse and Soybean Growers executive director Francois Labelle said the MPSG also supports the concept and will support any community that looks to pursue the project.

“The association has taken the position that we want to see this in Manitoba; that is our goal. After that we will not take position on any specific location,” Labelle said.

“When we consider the high percentage of our soybeans that goes for export and in turn we import large amounts of soymeal for our animal-feeding industry, it would only make sense to process locally,” Labelle said.

In 2014, the MPSG contracted Mercantile Consulting Venture Inc., to conduct a feasibility study on bringing a soybean crush facility to Manitoba, which was released in March 2015.

The report concluded construction of a crushing plant would produce several net benefits for the province.

Soybean producers would have easier access to markets with the ability to bypass rail freight. Livestock producers would also gain a local protein feed supply at competitive prices.

A large-scale facility would create a number of local economic benefits, both by keeping margins within provincial borders and spinoff effects through additional tax income and construction in the building phase.

The feasibility states that the facility could create a pre-tax benefit of approximately $190 million annually.

“For the study a location needed to be used as a reference point for freight calculations etc. This by no means was highlighting or identifying the best location for a facility,” Labelle said.

The feasibility study examined Elm Creek as a location and took into account its proximity to production, rail lines, feed mills and end-users.

The location was noted to create strong competitive advantage due to the distance to U.S. crushing plants.

“A final selection of a location will need a much more in-depth feasibility study to identify rail service, road access, labour availability, supply of product and easy access to market for the meal,” Labelle said.

The report recommended it would be best if the plant were a ‘switch plant,’ designed to crush both soybean and canola, to allow the maximization of potential crush margins.

“This option still keeps the soybean crush margins obtained from Manitoba soybeans in the province, and maintains all of the positive aspects for grain and livestock producers,” stated the report.

Labelle said the study was conducted to get a better idea of what needs to be considered in order to bring a plant to fruition but they have no commitment to a set location or timeline at this point.

“We just want to see this happen in Manitoba, that is what is important. We partnered on the study to get people talking and get the interest in a facility and are hopeful it will happen in the future.”

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