There has been extensive recent investment activity in China's soy crushing sector, at least among domestically owned producers. In October 2009, Sinograin commenced construction on a new soy processing plant in Zhenjiang city, Jiangsu province. Due to commence operations this October, it cost approximately RMB300 million (US$43.8 million) and has the capacity for the pre-pressing and leaching of 3,000 tonnes of soy daily.

 

That followed an August 2009 COFCO announcement of its decision to establish a soy processing plant in Qinzhou, Guangxi. Upon production, it is able to process 1.2 million tonnes of soy and 480,000 tonnes of oils annually. Previous to that in July 2009, Zhongfang Cereal & Oil Imports and Exports Co Ltd acquired a 70% stake in Zhanjiang Huanong Co. This came on the heels of an April 2009 announcement, when COFCO began the construction of an oils and grains integrated base in Tianjin. When production is in full gear, COFCO's Tianjin annual oil processing will amount to six million tonnes.

 

In November, Zhongfang fully acquired Guangdong Fuhong Oil Products Co Ltd for RMB366 million. That same month, it commenced construction of a new crushing facility in Tianjin. Upon completion, the new plant will have a daily refining capacity of 1,600 tonnes and a palm oil fractionation capacity of 600 tonnes. The company is expected to raise its daily refining capacity to 3,000 tonnes in 2010. On top of all the aforementioned developments, the company is currently building a large-scale logistics and oil processing base in Shandong's Rizhao City.      

 

On the other hand, since December 2007, foreign investors have been prohibited from building new oil crushing plants or acquiring existing ones in China. Essentially, that was part of a larger Chinese government plan to accelerate the restructuring of domestic soy crushers and guide their restructuring via mergers, acquisitions and reorganisations. With a number of smaller-scale, technically backward crushing plants being eliminated, it raised the overall standard of domestic crushers. Due to the new policy, most of the acquisition projects and new plants built in China last year were under the control of state-owned enterprises.

 

Indeed, China's soy crushers, despite their impressive record of recent investments, are merely playing catch up. Among China's top 10 soy crushers in 2009, four are foreign-owned. Of the six Chinese crushers, three are state-owned while the remaining three are privately-owned. Despite the huge number of domestic crushers, the combined crushing capacity of these 10 companies is accountable for 57.9% of national output.

 

In 2009, there were six enterprises in China that have a daily crushing capacity of 10,000 tonnes or more. Here too, we saw a predominance of foreign companies. The top six are namely Wilmar International Limited, Jiusan Group, COFCO, Zhongfang Group, Cargill and Noble Group. Wilmar International Limited, a foreign-owned enterprise, is still the leading soy crusher in China. Meanwhile, Zhongfang Group rose to the fourth spot due to its acquisition of several crushing plants last year.

 

Going forward, as China imposes foreign investment restrictions on soy and oil processing, overseas enterprises are poised to lose market share. At the same time, to get around these restrictions, some major foreign enterprises are planning to get their operations listed in China itself. For instance, Wilmar plans to split off its Chinese grain and oil operations and list them in Hong Kong, thus becoming a Chinese enterprise. Such isolated instances not withstanding, large-scale state-linked companies such as COFCO, Sinograin and Zhongfang are expected to continue their strong momentum of expanding, building and acquiring crushing plants.

 

 

Regardless of ownership however, more of crusher's soy is coming from abroad and less from China itself.  Due to a poor Latin American crop, much of China's estimated 41.7 million tonnes of 2009 soy imports came from the United States.

 

On the other hand, China's farmers had reduced their soy planting areas as the global financial crisis had led to declines in domestic soy prices. Instead, they turned to corn planting, causing this year's soy planting acreage to fall 4% year-on-year. Furthermore, as the initial soy growing phase in the northeastern production region encountered rainy conditions and severe drought in the later stages, soy output fell as a result while the quality of the final product was relatively poor.