The global soybean market has been upended. Can Canada come out on top?

By Kathryn Blaze Baum / Environment Reporter
The Globe and Mail

When Jim Millington crossed the border from North Dakota to Manitoba in late May, the trunk of his Toyota Highlander hybrid SUV was full – but not just with luggage from his business trip to Fargo. It also contained an undisclosed number of 10-kilogram bags of soy flakes and five-litre jugs of crude soybean oil.

Mr. Millington didn’t want to reveal the quantities of these soybean products because his new company, Canada Protein Ingredients, is in the midst of scale-up trials for a proprietary process to produce non-GMO soybean protein isolate for human consumption. He doesn’t want to tip off any potential competitors to the volume CPI’s processing plant will manufacture when it comes online, likely at the end of 2022 or early 2023.

The Ontario-based company’s foray into the soybean protein isolate market is a first for this country. There is currently no Canadian processor making that type of isolate – the high-protein ingredient in tofu, tempeh and other plant-based alternatives to meat. “We’re adding value to a Canadian crop,” Mr. Millington said, “and we’re keeping a lot of that value here at home.”

While Canada’s overall soybean production pales in comparison to the United States and South America, the country is a major supplier of high-quality, non-GMO soybeans for human consumption. But amid COVID-19 supply-chain bottlenecks, Canadian exporters are having trouble getting their soybeans to market. The way Mr. Millington sees it, why should the beans have to leave Canada to be transformed into a premium product? Why not process them here, creating value and jobs in the country where the crop was grown?

This is an especially apt question as Canada begins to emerge from the pandemic to snarled global supply chains. The pandemic has caused unpredictable dips and spikes in demand, exposing vulnerabilities in the way companies and countries move goods. Canada’s food supply chain bent, but it didn’t break. Now that parts of the world are beginning to return to normal, there are new problems – and opportunities – in the processing sector.

When it comes to the global plant-protein industry, soy is the leader, accounting for about 70 per cent of the market. “It’s the crop that produces protein,” Mr. Millington said. His company is betting on massive growth in the sector as the global population increases, Asia’s middle class grows, and more and more people want an environmentally sustainable alternative to meat.


Mr. Millington examines fresh protein powder at the Food Development Centre.


Sales of processed food and beverages in Canada totaled nearly $118-billion in 2019, and 10 per cent of that came from grain and oilseed milling. Over the past five years or so, exports of processed food and beverages grew at an average annual rate of nearly 7 per cent, according to the federal agriculture department.

Ottawa is optimistic the trend can continue. The federal government has created innovation superclusters to boost growth in five industries, including plant-based protein, which is eligible for up to $153-million in funding.

The total value of CPI’s project is about $50-million, $7.3-million of which was provided by Regina-based Protein Industries Canada – the industry-led, government-funded non-profit organization representing the sector’s innovation supercluster. According to an Ernst and Young report commissioned by the non-profit, the global plant-based foods market is expected to reach $250-billion by 2035.

CPI’s plans come at a time when soybean prices have been trading at near-record highs, owing to several factors, including a resurgence in demand from China for GMO soybeans to make livestock feed; dry, warm weather in key U.S. states that caused early-season concern for this year’s crop; increased demand for vegetable oils as feedstock for renewable fuels; and global supply chain issues, including a worldwide shortage of shipping containers and disruptions at ports due to COVID-19 outbreaks and labour strikes.

Global soybean prices rose from US$499.98 a tonne last November to US$643.92 in May – a 29 per cent increase. Prices for the soybean oil complement rose by more than 50 per cent over the same period. “The market went bonkers in a short period of time,” said Jon Driedger, vice-president of LeftField Commodity Research in Winnipeg. “There’s a lot going on in soybeans right now.”


Mr. Millington holds defatted soy flakes. Soybeans are Canada’s third-largest field crop, behind wheat and canola, with more than 30,000 farms growing the legume.


The world’s top three soybean producers are Brazil, the U.S. and Argentina. And the biggest customer is China, which takes about two-thirds of all global exports, the vast majority of which is GMO beans for livestock feed.

For years, China was Canada’s top export market for soybeans. In 2018, Canada’s shipments to China reached nearly 3.6 million tonnes. But the following year, that number plummeted to just 56,000 tonnes amid friction between Ottawa and Beijing over the arrest of Huawei executive Meng Wanzhou.

As China rebuilds its hog population after an African swine fever epidemic nearly halved its herd, Canada’s soybean exports to the country increased to nearly 450,000 tonnes last year – still a fraction of what they used to be.

Soybeans are Canada’s third-largest field crop, behind wheat and canola, with more than 30,000 farms growing the legume. Production last year totalled more than 6.3 million tonnes, most of that in Ontario, Quebec and Manitoba. Roughly two-thirds of Canadian soybeans are exported, bound primarily for Iran, China, Japan, Italy and Bangladesh.

The beans are either exported raw or crushed in Canada into their two main components: oil, which is used in cooking, renewable fuels and plastic resin; and meal, which is overwhelmingly used in livestock feed. Canada has three large processing plants – two in Ontario and one in Quebec – as well as some smaller facilities in those provinces and in Manitoba. The country processes about one-third of the soybeans it produces; the U.S., by comparison, processes roughly half of what it grows.

Mr. Millington is not alone in believing there is room to increase Canada’s processing capacity.

Minnesota-based Ceres Global Ag Corp. is in the midst of completing an expansion of its soybean processing plant in southern Manitoba in light of strong demand for livestock feed in the area and rising demand for renewable biofuels in the U.S. (soybean oil is the primary raw input for renewable diesel). “Already in southern Manitoba, the value of our soybean oil has more than doubled in the last six months,” said Ceres president and chief executive Robert Day. “We like the prospects of that business.”

Brian Innes, executive director of industry group Soy Canada, said there is momentum in the sector to increase processing capacity, which would boost the economy, create jobs and limit trade risk. “There are a lot of projects in process, but the CPI plant is the first to be announced,” he said. “It’s the goal of the soybean industry to process more here in Canada.”


One of four warehouses at the head office of Ceresco, one of Canada’s largest exporters of food-grade soybeans, in Saint-Urbain-Premier, Que.


While CPI is looking to keep its soybeans in Canada, Manuel Gendron is just trying to get his out. Mr. Gendron is the general manager of Ceresco, one of Canada’s largest exporters of food-grade soybeans.

The Quebec-based company ships non-GMO soybeans to 45 countries, with about 35 per cent of its exports going to Japan. That product is shipped in containers from Prince Rupert or Vancouver. Shipments bound for Europe or China depart Canada in containers via Montreal or Halifax. (GMO soybeans sold for livestock feed, on the other hand, are typically shipped in far larger volumes by dry-bulk vessel.)

The challenge – for Ceresco and exporters of all kinds of goods, all around the world – is reserving containers. Even when companies secure containers at premium prices, steamship lines often delay their shipments with little warning. The situation is so grave Ceresco purchased a warehouse facility just to store the beans it can’t ship quickly enough. “I’ve never seen this before,” Mr. Gendron said. “What normally takes nine days to get to a customer in Europe is now taking 40.”

Before the pandemic, containers that arrived in Canada with imports from China got replenished with Canadian exports. Now, containers are going back to China empty: With containerized shipping rates far higher out of China than out of Canada, steamship lines want to get them back to Asia as quickly and fuel-efficiently as possible. “I don’t see anything getting better within a year,” Mr. Gendron said.

Neither does Murad Al-Katib, president and CEO of Saskatchewan-based AGT Food and Ingredients, which buys protein-rich crops such as lentils, peas, beans and chickpeas from farmers around the world, and ships to more than 120 countries. “Container freight rates are rising at a pace that I’ve never seen in my 20-year career,” he said. “Ultimately, it’s going to contribute to food inflation.”

If AGT can’t secure enough containers, the company may have to temporarily change the way it does business. AGT already does some dry-bulk freight, and it may have to rely more heavily on that option. Instead of shipping 20-tonne units in containers to multiple ports, it could ship 10,000-tonnes in a bulk vessel to a single port and then sell the product parcel-by-parcel upon arrival overseas.

While AGT does not sell soybean products, its focus is plant-based protein. And Mr. Al-Katib has high hopes for the sector. “Canada has the opportunity to be the first stop on the protein highway,” he said. “We have arable land and we have water. Those are two resources we have that are globally scarce today.”


Mr. Millington climbs a spray dryer. Mr. Millington said CPI may be the first to go to market with a Canadian soy protein isolate, but he’s convinced more will follow.


Despite the inconveniences of travelling to the U.S. during a pandemic, Mr. Millington’s trip to North Dakota was a must. Soybeans are roughly 20 per cent fat and 40 per cent protein; the rest is a combination of carbohydrates and fibre.

In order to create the protein isolate, the fat – in the form of oil – must first be extracted. But there is no pilot-sized test facility in Canada that does this, so CPI turned to North Dakota State University and a team of scientists and technicians to do it for the company.

Mr. Millington quarantined in Fargo for a week before supervising phase one of the trial at the university. With the oil and flakes successfully parsed, he packed up his Highlander and drove three hours to Winnipeg. He then self-isolated for two weeks before delivering the bags and jugs to the Food Development Centre in Portage la Prairie. There, the second and final phase of the trial is under way.

CPI is in the process of selecting a specific site for its new plant, but it will be in Quebec, Ontario or Manitoba. When the facility is up and running, it will employ about 40 people. The oil extracted there will be sold for cooking. But it’s the flakes that have Mr. Millington most excited.

There are three types of soy protein ingredients: textured soy protein, which is about 50 per cent protein; soy protein concentrate, which is 65 per cent to 70 per cent protein; and soy protein isolate, which is about 90 per cent protein. “Soy isolates trade at a premium to other soy protein sources,” Mr. Millington said.

Unlike most high-yield processing facilities that use hexane to separate the oil from the raw bean to create isolates, CPI’s extraction process relies on an alternative solvent. The soy isolate will be sold as “clean label” – an ambiguous term that means different things to different companies.

In CPI’s case, it refers to the company’s extraction technology. “Compared to our competition, our process is much more environmentally friendly and sustainable,” Mr. Millington said. “Our process will also comply with organic certification standards, whereas a hexane process does not.”

Mr. Millington said CPI may be the first to go to market with a Canadian soy protein isolate, but he’s convinced more will follow. “The value-added component is very attractive,” he said. “It’s clear that the market is headed in that direction. Consumer diets are changing, and the demand is far exceeding supply.”