May 16, 2007

China's soybean imports to grow steadily for next few years

 

 

China's soybean imports will likely continue stable growth for the next couple of years as the economy expands steadily and more existing capacity for crushing is utilised.

 

China will struggle to increase domestic soybean output, while population growth and increased wealth will boost demand for animal feed including soymeal and vegetable oils such as soy oil.

 

"The imports of soybean will further increase, likely at an annual growth rate of 7 percent, as the demand for animal feed is strong," said Cui Xiaoli, a researcher of market economy under the State Council's Development Research Centre.

 

Strong growth in gross domestic product will boost purchasing power in China, analysts say. In the first quarter, China's GDP rose 11.1 percent from a year earlier, accelerating from 2006's growth rate of 10.7 percent, which marks the quickest annual rise in a decade.

 

China targets feed production of 131 million tonnes in 2010, with an annual average growth rate of 4.5 percent, according to the Ministry of Agriculture's most recent five-year plan.

 

Meanwhile, China's oilseed supply is forecast to grow by about 2 percent in 2007/08, while oilseed meal output is forecast to increase by 4 percent, the US Department of Agriculture said in a recent report.

 

But reaching these processing goals will require further soybean imports, as planting for other crops such as corn puts soybean output at risk.

 

In its most recent monthly report, the China National Grain and Oils Information Centre maintained its 2007/08 forecast for acreage of soybeans at 8.6 million hectares, down 5.5 percent from 9.1 million hectares a year earlier.

 

It also forecast soybean output to decline by 3.2 percent to 15 million tonnes from 15.5 million tonnes in 2006/07.

 

Li Ke, an analyst at CNGOIC, said last month that he expects China to import 31 million tonnes of soybean this year, up 9.2 percent from a year earlier.

 

Imports are likely to reach 35 million tonnes in 2007/08, a further increase of 12.9 percent, he said.

 

China, the world's largest soybean importer, accepted 28.4 million tonnes of soybean in the 2005/06 crop year, up 10 percent from a year earlier, according to data from the General Administration of Customs.

 

China's soybean-crushing capacity has expanded, and the industry is undergoing a period of consolidation as large processing plants buy up smaller, domestically owned ones which are plagued by overcapacity, industry sources say.

 

"The possibility of using more of the existing crushing capacity does exist due to the growing demand for meat and edible oil," said Lu Xin, a trader at COFCO Futures Co.

 

China was only using slightly more than 40 percent of its total crushing capacity of 80 million tonnes at the end of 2006, according to the USDA report.

 

Foreign ownership accounted for between 65 percent and 70 percent of the total estimated utilised capacity, it said.

 

China is a large consumer of soymeal, and turned into a net importer of soymeal in 2005/06, again amid increasing demand from the feed meal sector.

 

China was a net soymeal importer from 1996 to 1999, but a net soymeal exporter from 2000 to 2005 due to increased soybean-crushing capacity.

 

Analysts say the country, with the help of low-cost land and labor, could yet again become a net soymeal exporter, as more existing crushing capacity is utilised. Cui at the State Council's Development Research Centre expects net export status within the next five years.

 

But challenges including the Renminbi's further appreciation and the increasing demand for bio-fuel will likely hinder the pace, analysts say.