Soybeans: The Unexpected Crop Behind Rising Food Prices | Insight | Full Episode

It is the humble crop that so much of our food production depends on. There's a big demand for soybean as an important component of animal feed. But with production concentrated in just a handful of countries... If one of those countries has any weather problems, that can really affect prices as well. And war, climate, and the pandemic shocks are sending prices through the roof. If the temperature is too high, it will reduce the rates of activities and it will reduce the crop yield. Could a soybean shortage hurt our dinner tables? If the situation continues to worsen, we will see more people suffering from food shortages. Some of them may even suffer from famine. Tempeh, a dish made from fermented soybeans. Affordable, nutritious, and tasty, tempeh is a staple for households in Indonesia. The country is the largest tempeh producer in the world, with over 40,000 small factory owners. One of them is 40-year-old Hadi Izwanto, whose factory is located in Dipok in the West Java province. His family has been making tempeh for generations. At Hadi's factory, one kilogram of soybeans can produce one and a half kilograms of tempeh. Indonesia imports about 2.5 million metric tons of soybeans annually, of which 90% are used to produce tempeh and tofu. This makes the country Southeast Asia's largest importer of soybeans. Tempeh and tofu are imported from other countries, such as America and Australia. The local market is more expensive, and the stock is also less, which doesn't meet the needs of all Indonesian tempeh and tofu vendors. The difference is huge. Soybeans were discovered 2-3,000 years ago in China. Their global soybean production hit 350 million metric tons in 2020. On average, about three-quarters is used as animal feed, 20% for direct human consumption, and 4% for industrial purposes such as biofuels and lubricants. Soybeans and soy by-products are one of the world's most traded agricultural commodities. But a recent trend has alarmed both governments and importers alike. Since the start of the pandemic, the price of soybeans has almost doubled, driven in part by a supply crunch. Soybean production can also be interrupted in the near term by many, many different sort of shocks, so to speak. For example, as a result of climate change, if temperatures go up tremendously, they go above the 40% centigrade, you know, kind of point, then you find that soybeans don't flower very well after that. So because of that, your production in the field is affected. This was the case in North America about four years ago, when there was a drought, lack of water, but temperatures went up tremendously. The US, as the world's number one soybean producer, actually exported much less itself. So those temporary effects are all there. Soybean exports around the world are dominated by just three countries, Brazil, the USA, and Argentina. And when these countries see erratic climate-related weather, shortfalls in one will see ripples across the entire supply chain. Brazil, the world's largest soybean exporter, saw its worst drought in 91 years in 2021. This follows a six-month-long drought the year before. And once any particular big producer, like the US, Brazil or Argentina, suffers from a climate shock, because these three countries account for more than 80% of the world's soybean production, then the rest of the world will suffer, because there's not enough soybeans going around, and it won't feed. And then along the way, you see disruptions, like the Russian-Ukraine crisis. So any time there's a disruption in supply, prices go up. Right now there's worries about drought in Argentina. Last year we had a drop in production in the US. And overall, that market tends to be in pretty tight, pretty good balance. Supply is usually matching with demand. So if we have a year where there's a drought in the US, a drought in Brazil, something else that happens, that can, even if it only reduces production a little bit, can really send prices up, because people still need to eat, so they're willing to pay a little bit more. And that feeds into higher prices for soybeans. As prices soared, the importance of soybeans to Indonesia's food security came sharply into focus. In February 2022, tempeh and tofu producers protested as they struggled with high production costs. They closed their businesses for three days, so there were no tempeh or tofu sold in the markets. Hadi was one of the protesters. We protested to the government so that the price of tempeh would go down. But it didn't go down. They only gave us subsidies, but the subsidies weren't even. The price of tempeh was still there, but we increased it. The price of tempeh went up. It went from 4,000 to 5,000, from 5,000 to 6,000. Some even reduced the price of tempeh. 38-year-old Chayuni runs a tofu and tempeh store in a market in Dipok. To make ends meet, she was forced to raise her prices. We solve our problems ourselves. Some are 5,000, some are 3,000. This used to be 5,000, now it's 8,000. The price of tempeh is increasing. We're a small-scale business. We want to make a profit. We want to make enough. We want to do whatever we want. Nowadays, we don't have many customers. We used to have a lot of customers, but now we have fewer customers. It's expensive now, so it's hard for us to sell our products. Tempeh and tofu are important and cheap sources of protein in Indonesia. The average Indonesian consumes about 12 kilograms of soy products a year, compared to around 8 kilograms of chicken, the most widely eaten animal protein. Nrseha is a domestic worker and a mother of four young children. They live in a makeshift house in Karawang. Rising prices will hit low-income workers like her the hardest. If I'm not mistaken, the price of tempeh used to be around 2,000 or 3,000 rupiahs. But because of imports, it's getting more expensive. It used to be cheap, but now it's expensive. So it's hard for us to sell our products. Unfortunately, in terms of food security, it's always the poorer people. People in the low economic strata are always affected. The reason is very simple. Of the available household income for food, the higher your income, the smaller the percentage of your income you spend on food. The lower your income, the higher the percentage you spend on food. Every Singapore household spends less than 10% of their household income on food. In our neighbouring countries, the figure is closer to 40 to 50%. And it gets worse as you go down household income. It's actually very sad that those with lower household incomes have to make choices between not eating meat or something else. And this affects, overall, the health of people. So the implications for food security are that definitely the lower-income folks will be affected, mainly the poorer, especially those who live in the cities, because they have no access to other kinds of protein. Net-net, I think any shortage, any rise in price of soybeans will definitely filter down to affect people in different ways. And there are worrying signs that the fall in soybean production could be a longer-term problem, with severe effects all along our food supply chain. Soybeans have been called the miracle bean. High in nutrients, it is consumed directly in the form of tempeh and tofu, or as soy milk. Vinasoy, Vietnam's leading manufacturer, produces almost 400 million litres of soy milk annually, enough to fill 160 Olympic-sized pools. To make soy milk, the beans first are boiled in water, blended, and then strained to extract the liquid. The process produces solid and liquid waste. What becomes of the leftovers is a crucial part of our food supply chain. With Vinasoy's operation, we produce about 50 to 60 tonnes of soy milk every day. The soy milk is then transported and used directly for the production of soy milk or tempeh, to farms and private farms. Soy by-products, from the manufacture of soybean oil or soy foodstuff, are packed with protein. It can be made into soy meal, and it is the world's most important animal feed. If you look at soybeans as a crop, soybeans are very high in protein. They're also a high-energy crop, and they have what we call the amino acid profile. It's an excellent one to feed animals and also human beings. It's got a very essential amino acid called lysine, which some other legumes don't have. So because of its good properties, there's a big demand for soybeans as an important component of animal feed. Apart from soybeans, you have other plant-based proteins, like rapeseed meal and also cottonseed meal. And apart from that, of course, animal-based proteins. Fish meal is a very good alternative, but the problem is that it's very expensive. For these reasons, soy meal dominates the market, accounting for over two-thirds of protein feedstock. It is mainly used for poultry, aquaculture and pig farming. In the Lang Song province of Vietnam, the soy meal from the Vinasol factory has made its way to the hands of farmer Chu Van Khan. In 2019, after the pandemic in Africa, we started to have a lot of discussions. At that time, people in the town were selling tofu. They were selling soybeans. People were selling a lot of them. Some of them were selling them in the river. So I started to use soy meal and I found it effective. Khan started his family farm back in 1985 with a mere 10 pigs. When he started including the nutritious soy meal in his pig feed, he saw a huge bump in their growth rate. I have to raise more pigs. There are about 40-50 pigs in my farm. I make three pots a day for the pigs to eat. The first pot is for the soybeans imported from the Vinasol soy milk factory. The second pot is for the corn flour mixed with a part of the soybeans. The third pot is for the pigs and the last pot is for the rice. I have to boil the rice to prevent it from burning. The soy meal is very good for the pigs. It's as good as the pig feed. Soy meal makes up 60% of Khan's pigs' diet. For his pigs to grow well, they are fed three times a day. Every month, he buys about six tonnes of residue from Vinasol through a wholesaler. However, even buying in bulk, he's feeling the pinch from rising prices. Before, the price was low, but now it has gone up to 20,000 a bag. 20,000 a bag of soybeans has gone up to 20,000 a bag. If it goes up even more, we won't be able to feed our people. The rising price of feed has caused meat prices to climb. In the same period that saw soybean prices double between 2020 and 2022, pork and poultry prices rose in tandem. While prices have come down in 2023, one research paper suggests that the long-term outlook could be bleak. Here at the Chinese University of Hong Kong, Dr Felix Leong and his team study the impact of climate change. They recently published a paper projecting that soybean yields could be reduced by 42% in the US and 22% in China by the year 2100 due to adverse weather and pollution. In my study, I look at the impacts of air pollution and climate change on food productivity. So I focus on the air pollutants called ozone. It could enter the stomata of the plants on the leaves and it would destroy the photosynthetic rate. So in my model, I'm doing simulations using four stable crops. So those are rice, wheat, maize and also soybean. I'm using all sorts of data available from the literature and we input all the data into the model.