BATON ROUGE, La. — Louisiana holds significant potential for new soybean processing investment, according to a study commissioned by Louisiana Economic Development. A soybean crush plant would align with increased planting of the crop in Louisiana, with expected overseas demand, and with existing oil refining capacity in the state. Memphis-based Informa Economics Inc. completed the feasibility report.
Soybean planting by Louisiana producers grew by 170,000 acres for the five years ending in 2010, and soybean crops now cover about 1 million acres annually in Louisiana. Agribusiness forecasters expect the Louisiana soybean acreage to continuing growing at an annual rate of 4.4 percent over the next 10 years.
Among other findings favoring establishment of a soybean processing plant in Louisiana are:
- Domestic demand: Demand for soybeans is driven by meal, with oil representing only about 18 percent of the content of the crop. The meal demand is directly related to the demand for livestock feed, which is expected to increase 21.7 percent in the U.S. by 2022.
- Global demand: World meat consumption has grown 150 percent since 1975, and that trend supports higher demand for soybean meal. In particular, emerging nations in Asia, such as China, are increasingly demanding animal-based protein. This new demand will fuel U.S. exports of both soybeans and soybean products in coming years.
- Local demand: Ample demand for soybeans exists within a 150-mile radius of several sites considered in the study: Central Louisiana, Northeast Louisiana and Southwest Louisiana.
- Oil refining: Though it constitutes a minority of the total soybean product, oil represents a significant portion of the value and is in high demand, driven by renewable fuel policy in the U.S. and the European Union. Also, oil-refining capacity already exists in south central Louisiana, providing a ready market for product from a soybean crush plant and additional value.
- Transportation: Low transportation costs to soybean meal and crude soybean oil markets place Louisiana in a distinct advantage for siting a soybean processing plant.
- Return on investment: An analysis of the crush margin -- the difference between the cost of the soybeans and the value of the products after crushing -- would produce a return on investment in the range of 8 percent to 25 percent, depending on the location and the plant capacity.
"Soybeans continue to be a vital component of Louisiana's historically strong agricultural production, and the potential for attracting new capital investment to process that soybean crop represents a great opportunity for our state," LED Secretary Stephen Moret said. "What the study reveals is bona fide market potential to capture added value for our soybean crop before it leaves our borders. We believe there's a genuine private sector opportunity here, and we look forward to marketing that potential to investors who can bring new value to our agribusiness sector."
LED prioritized the agribusiness sector as an industry in which Louisiana can generate new investment, jobs and income. The Informa study grew out of that strategy. To learn more about the potential for soybean processing in Louisiana, visit OpportunityLouisiana.com/Agribusiness, read the report summary here, or contact Director of Agribusiness Kelsey Short at (225) 342-5892.