One of Minnesota's major cash crops has lost a little bit of its luster. Soybeans are sometimes called a miracle grain. Besides their food value, they can be made into diesel fuel, plastic, ink and more than 2,000 other products. In fact, it seems the only thing farmers can't make from soybeans these days is money. The problem is that other countries have discovered the crop, and are planting it in record numbers. This has caused a chain of economic events which has farmers scrambling to find ways to make new money off an old crop, the miracle bean.

	The Miracle Bean Soybeans used to be called the miracle bean, because of their many different uses - and because they used to bring high prices. But prices have gone down as production around the world has gone up. (Photo courtesy of USDA)

Soybean cultivation began in China more than 5,000 years ago, where it was called the "greater bean." "Great" seems to be the right word for a yellow legume that could power the world - fuel for diesel engines as well as food for the human machine. But on a windy winter day, seated in his southwest Minnesota farm home, Bob Kirchner says in many ways, soybeans now are just another crop.

"It used to be that soybeans were probably the premier one as far as generating income of the grains. Now it's still as good - if not better - than many of the others, but it's just not near as good as it used to be," says Kirchner.

Soybean prices underscore his point. Five years ago, soybeans brought $6 or even $7 a bushel. But since then, prices have tumbled by 40 percent. Soybeans right now fetch about $4 a bushel. Soybean producers once had an optimistic slogan, "beans in the teens," reflecting a belief the miracle crop would bring miraculous profits. There seems no chance now that soybean prices will ever reach $13 or $14 a bushel, so farmers like Bob Kirchner are looking for new ways to make money.

"You have two choices - either to horizontally expand, keep farming larger and larger operations on almost non-existent margins, and hope for government price supports. Or, you look at adding some solid margins to your operations that aren't derived from government price supports, which I think is a much sounder alternative," he says.

Kirchner helped organize a cooperative based on option two. About 2,300 other farmers from four states have banded together to build a soybean crushing plant in southwest Minnesota. It should add at least 50 cents a bushel to the price of their soybeans.

	Phil Warnken, president of AgBrazil, in a soybean field in the Western Bahian region of Brazil. March, 2001. Higher soybean production in Brazil is lowering prices for U.S. soybean farmers. See more images of soybean farming in Brazil. (Photo courtesy of www.agbrazil.com)

"The prime motivation is to bring some profits back to the farm, some cash, which we desperately need," says Kirchner.

The profits really flowed when U.S. soybean producers dominated the world market in the 1970s and '80s. But that's no longer true. South American soybean production has increased steadily, and now equals U.S. output. Brazil, the star perfomer, has doubled production since 1991.

"Brazil...has somewhat of an unlimited capacity to expand," according to U.S. Agriculture Department economist Keith Menzie.

That worries southwest Minnesota farmer Bob Kirchner and other U.S. soybean producers. The more soybeans Brazil produces, the larger the world supply is - which tends to hold down prices.

The source of Brazil's growth is a mostly untouched Alaska-sized grass and shrub landscape, known as the cerrado. It covers much of interior Brazil south of the Amazon rainforest. Once believed infertile for crops, the use of fertilizer pushes the soil of the cerrado to produce better soybean yields than choice U.S. ground.

New Zealand native Chris Ward now lives and farms in Brazil's cerrado. He's never seen a crop failure because the region's tropical climate yields generous rainfall.

"It's exciting, because you kind of see things happening. I've been there 16 years planting and we've seen tremendous changes. We started off when I first went there (with) 25-bushel yields. We're talking now an average of 60," says Ward.

"The prime motivation is to bring some profits back to the farm, some cash, which we desperately need." - Minnesota soybean farmer Bob Kirchner

That's far above the 50 or so bushels per acre that Midwest farmers count on in good years. Because the cerrado is still relatively remote, with few highways or railroads, it's expensive to ship in the basic ingredients of soybean production. Farmers there pay twice as much as U.S. producers for fertilizer. But they have one big advantage - cheap land.

An acre of prime Midwest farmland costs six times or more what an acre of land in the cerrado brings. The USDA's Keith Menzie says that means Brazilian farmers can profit on soybean prices which are money losers to American producers.

"Speaking to one or two farmers down there, it seemed to me that they are comfortable with soybean prices in interior Brazil as low as $3.50 to $3.75 a bushel. (They) can still make a little bit of a profit at that level," says Menzie.

So even the current $4 price of soybeans signals continued growth in Brazil. In the U.S., high land costs means farmers need more than $5 a bushel to break even.

Government subsidies have kept prices in that range the last few years. In Brazil, the harvest is just beginning, and it's expected the crop will be at least 10 percent larger than last year. Brazilian farmer Chris Ward says the expansion will continue, because many people there want to give farming a try.

"If he's got a piece of land and a tractor, and he thinks he's going to have a go, he'll take all the risks in the world," says Ward. "A banker or stock broker would say 'you're wasting your time, you're going to go broke.' But he won't listen, he'll have a go."

Not all the land in the cerrado is suitable for crops, but enough is to fuel decades of growth. By one estimate, the potential cropland there equals the combined area of Minnesota, Wisconsin, Iowa, North Dakota and South Dakota.

	Southwest Minnesota soybean farmer Bob Kirchner is joinging about 2,300 other farmers from four states, who have banded together to build a soybean crushing plant in southwest Minnesota. It should add at least 50 cents a bushel to the price of their soybeans. (MPR Photo/Mark Steil)

University of Minnesota agricultural economist Richard Levins worries that means an all-out soybean war, a race to the price bottom, as producers worldwide try to lower their cost of production.

"If we continue this competition, I think one big loser is going to be the environment," says Levin.

He says Brazil will pay an environmental price as wild areas are plowed under. In the U.S., he worries farmers pressed by the bottom line will cut corners to produce soybeans more cheaply. He says that could aggravate field erosion, causing more soil and farm chemicals to enter already sediment-rich streams and rivers.

"Winning is almost worse than losing," says Levin. "The only way you win is to be the absolute cheapest competitor in the world. We cannot build a strong environment and strong rural communities based upon cheap products."

But for many farmers, those types of global concerns seem distant. They're more concerned with trying to make a living today. Bob Kirchner says the 2,300 farmers who've joined Minnesota Soybean Processors to build a crushing plant have contributed an average of $12,000 each. That's about $28 million. Kirchner says the silver lining in low soybean prices is that it makes taking a risk on something like a crushing plant a lot easier.

"You can make many things with soybeans - economically - that just a couple years back you couldn't. Because it would be a little bit out of the price range. For example, biodiesel now is in the range where it's getting cost competitive to traditional diesel fuel," says Kirchner.

If biodiesel finds a wide market, Kirchner says it's something the soybean crushing plant, with some additional equipment, could easily make. He says that's his vision of the future for the miracle bean. The money will be in making something from soybeans, rather than simply growing more and more of the crop.

United Soybean Board