May 27, 2004

High Soybean Prices Hurt Japan's Industry
 

A recent high in soybean prices driven by increased demand in China is dealing a heavy blow to Japanese makers of traditional staples such as tofu and soy sauce.

Soybean prices started to rise rapidly around last fall. Before that, a bushel cost $4.50 to $5. In March, futures prices topped the $10 mark at the Chicago Board of Trade for the first time in 16 years.

The jump in soybean prices was caused by a poor harvest in the U.S., due to bad weather. Brazil and Argentina, which had been expected to make up the shortfall, were hit by drought.

Like any other crop, soybeans are subject to price fluctuations caused by supply shortfalls.

Yet Akio Shibata, deputy director of Marubeni Research Institute, said the rise of China as a big soybean importer marks a stark difference from the past.

Virtually self-sufficient until 1996, China has become the world's biggest importer of soybeans, as demand for cooking oil and livestock feed has exploded.

"The world's soybean trade is at about the level of 60 million tons. Chinese imports now account for one-third of that," Shibata said.

So, even a bumper year by the world's big producers, such as the U.S. and South American nations, is not likely to ease the tight supply situation soon, he said.

Soybean demand in Japan, including for livestock feed, is meanwhile projected to be 4.98 million tons this year, according to the agriculture ministry.

The domestic harvest is forecast at 232,000 tons, or less than 5 percent of the demand, with the rest to be imported, the ministry said.