China robust export market for soybeans

China robust export market for soybeans Processors increasingly turn to imports, which are cheaper and more plentiful, despite efforts to boost local soybean output. By Coco Liu Coco Liu is WATT’s China correspondent. International trade has slowed during the global financial crisis,

Local farmers in Heilongjiang province stood in line to sell their soybeans in early 2009.
Local farmers in Heilongjiang province stood in line to sell their soybeans in early 2009.

International trade has slowed during the global financial crisis, but soybean export volume to China still shows remarkable growth. From January 2009 to April 2009 exports jumped 36.2% compared to the same period of 2008, according to China Customs statistics.

As domestic soybean supply fails to meet rising demand in China, more than 10 million tons of imported soybeans have entered the Chinese market every year since 2000. In addition, soybean crushing companies - major buyers of soybeans in China - have shifted to imported soybeans. That’s due to the price advantage imports hold over domestically grown beans. As a result, China’s soybean imports are expected to keep rising in the future, in spite of more supportive efforts towards local producers.

China’s soybean import volume increased from 10.42 million tons in 2000 to 30.82 million tons in 2007, an increase of 195%, according to a 2008 report issued by China’s National Development and Reform Commission (NDRC).

Domestic beans: just 35% of use

Due to low per unit area yield and a declining land base, China’s soybean production is rising slowly and only meets about 35% of domestic soybean consumption. Meanwhile, low profits drive more farmers to leave this market. As a result, soybean suppliers – mainly from the United States, Brazil and Argentina – are taking advantage of this trend and boosting soybean sales to Asian nations.

China’s rising demand of soybean oil and soybean meal drives its soybean crush volume. The official statistics show that China’s soybean crush volume climbed from 19.77 million tons in 2000 to 34 million tons in 2007, an increase of 72%.

However, China’s annual soybean output fluctuated between 15 million tons and 17 million tons from 2000 to 2006, and keeps a falling trend since 2004, according to the NDRC report.

Low yields

“Low per unit area yield and decreasing planting land block the growth of China’s soybean production,” Chen Lina, analyst at Beijing-based Orient Agribusiness Consultant, Ltd., told  Feed International

The latest statistics from China’s Ministry of Agriculture (CMA) show that the per unit area yield of domestic soybeans increased slightly – from 1.66 tons per hectare in 2000 to 1.72 tons per hectare in 2006.

In addition, the planting land of soybeans in China decreased from 9,307 kilo hectare in 2000 to 9,280 kilo hectare in 2006, the report said.

The same trend is expected to continue this year. One key reason why: Low profits force more farmers to give up soybean production and grow other grains.

“Sixty to 70% of local farmers suffered loss or just had small profits in their soybean sales last year,” said Zhou Liangqi, a 58-year-old farmer from Heilongjiang province.

Higher costs

Due to higher prices of fertilizers, fuel and labor, production costs of soybeans in Heilongjiang province climbed from 2,400 yuan [US$351] per ton in 2007 to 3,000 yuan [US$439] per ton in 2008, said Zhou. However, at the same time, its purchasing price only reached 3,000 to 3,200 yuan [US$439 to US$468] per ton.

In order to support soybean farmers, from October 2008 to June 2009, the Chinese government purchased 7.2 million tons of soybeans at 3,700 yuan [US$542] per ton in three major growing regions. However, low profits still affect domestic soybean production.

Table: China’s top three soybean importers in 2008 

This year, estimated planting land of soybeans in Heilongjiang province will drop by 3.64% compared to last year, according to a latest survey from Heilongjiang Provincial Bureau of Statistics. However, plantings wheat, maize, and rice have all increased in 2009, according to estimates.

Heilongjiang province produced about 7 million tons of soybeans in 2008, accounting for 40% of China’s soybean production, shown in China Custom statistics.

New buyers

More than half of China’s imported soybeans were consumed by domestic crushers with foreign capital. But now, due to production costs concerns, China’s state-owned enterprises, private companies and collective enterprises intend to buy more soybeans from abroad.

China Custom statistics show that state-owned enterprises imported about 10 million tons of soybeans in 2008, an increase of 64.2% compared to 2007. Meanwhile, imported soybean volume from China’s private enterprises and collective enterprises also increased by 25.6% and 2.5% respectively, according to the official statistics.

Some crushers located in major growing regions also favor imported soybeans. Heilongjiang-based Longjiangfu Edible Oil Co., Ltd. is one of them.

“Our new factory in Liaoning province is scheduled to crush 1 million tons of imported soybeans annually from late 2009,” said Song Shengbing, the president of Longjiangfu. “We prefer imported soybeans because of their lower price,” he added.

As production costs increased in line with higher price of domestic soybeans, Song’s company just broke even in business last year. However, other crushers, who used cheaper imported soybeans, on average, earned 300 yuan [US$44] per ton, according to Song.

Being unable to afford expensive domestic soybeans, 68 major crushers in Heilongjiang province had to shut down their business for a few weeks last year, said Zhang Chunhai, the director of Training and Guiding Department at Heilongjiang Soybean Association.

“Although there is no written document from the government, all the local factories are not allowed to use imported soybeans,” according to Zhang. “It supports local soybean farmers, but hurts most crushers,” he added.

In order to purchase cheap imported soybeans, increasing local crushers have move out of Heilongjiang province and opened new plants in China’s port cities.

For example, Jiusan Edible Oil Industry Group, the biggest soybean crusher in Heilongjiang province, built three factories with 4.5 million tons of annual capacity totally in Tianjin, Dalian, and Fangchenggang, -- all of which are port cities.

China’s soybean crushers used to build plants nearby major growing areas, but now most of them are located in port cities.

Turning point?

Since 2008, China has kicked off an official investigation in an effort to gauge the “anti-dumping” status of imported soybeans. However, experts predict that imported soybeans will still keep its dominance role in China’s soybean market.

“Soybean producers, local crushers and industrial associations complained about the fierce competition from imported soybeans, but none of them plan to apply for an anti-dumping investigation towards China’s soybean imports,” said Heilongjiang Soybean Association’s Zhang.

On one hand, as a result of lacking related knowledge, small operations do not know how to apply for the anti-dumping investigation, explained Zhang.

On the other hand, some major operations also purchase and crush imported soybeans in their subsidiaries, so it is hard to make an alliance against China’s soybean imports, he added.

In addition, outside crushers in China -- New York-based Bunge Limited for example -- can use cheap soybeans supplied by their producers in South America, and will not turn to domestic soybeans, according to “China’s Soybean Imports and Soybean Industry report” published by Beijing’s China Agriculture Press in 2009.

Another important reason is that China has to buy soybeans from abroad in order to offset short supply in domestic market. China’s soybean consumption already reached about 44 million tons in 2007 and will keep increasing, while its soybean output is only to reach 19.5 million tons by 2015, according to the NRPC report.

Page 1 of 32
Next Page