Rising demand from China, which saw soybean imports more than double from 10.4 million tonnes in 2001-2002 to 23 million tonnes in 2003-2004, has compounded the effects of a drought in the US last summer, and pushed up soybean prices to a 15-year high.
Soy processors saw the price of soybeans rise from around $5.80 per bushel last summer to more than $10 earlier this month.
"We've been in this business for 20 years and haven't seen these prices before. It has dramatically cut into our margins and also forced a price increase on our part," Gary Brenner, marketing manager at Israel-based Solbar, told NutraIngredients.com.
He added that while isoflavones are considered an added value product, soy proteins, the major part of Solbar's business, cannot follow the price increases seen in the raw material.
"While soybeans are up 90 per cent, our proteins have so far only gone up around 10-15 per cent. We have been resisting further increases but I'm not sure how long this can last," added Brenner.
Solbar, the number three supplier of soy proteins, sources around 90 per cent of soybeans from Brazil, heavily investing in non-GM beans and guaranteeing traceability from the farm to transport. It has also been impacted by escalating freight costs, also a result of the booming Chinese economy.
There are further threats for soy processors. Brazil's 2003-04 soybean crop forecast has been lowered to 49.3 million tonnes, compared to 52 million tonnes harvested last year, due to drought, while the US department of Agriculture's chief economist Keith Collins has warned of the need to slow export pace as well as the domestic crushing pace, "because we've been running at very high levels at both and we would run out of soybeans".
But there are also some signs of hope for ingredient companies and food makers. Reuters reported yesterday that speculation that China will succeed in slowing the growth of its economy saw the biggest drop in soybean futures in a week.
Soybeans for May delivery fell 14.5 cents, or 1.5 per cent, to $9.80 a bushel on the Chicago Board of Trade. Prices have fallen 7.9 per cent since reaching a 15-year high of $10.64 on 5 April.
Meanwhile soybean futures in China are also down, reflecting slowing demand as the high cost of imports made it unprofitable for some processors to make animal feed and vegetable oil.
There is also likely to be increased Chinese soy production as well as more planting in the US. China's soybean harvest may rise to 18 million metric tons from 16.5 million tons in 2003, Zhang Zhaoxin, an analyst at China's agriculture ministry told Reuters.