August 18, 2009

China's COFCO to establish soy processing base in Guangxi

China National Cereals, Oils & Foodstuffs Corporation (COFCO), the largest oils and food importer and exporter in China, will be setting up a soy processing base in Qinzhou, a port city in southwest China's Guangxi Province.

This is the first such project that COFCO invests in Guangxi's North Bay Economic Zone. With the construction expected to begin this September, the base is capable of processing 1.2 million tonnes of soy annually once production comes online.

COFCO made its first investment in the soy processing industry this April when it invested RMB4 billion (US$585 million) into an oil and food base in Tianjin, which will be used to process imported soy. Once operation begins, COFCO's annual oilseed processing capacity in Tianjin is expected to reach six million tonnes.

Meanwhile, other foodstuff companies are also actively boosting their soy processing businesses. For instance, China Grain Reserves Corporation (Sinograin) just started a soy processing project in Dongguan, Guangdong Province, which is expected to process one million tonne of soy annually. In addition, Jilin Grain Group will be establishing a soy processing joint venture which will have an annual processing capacity of one million tonne.

Private enterprises such as Longjiangfu Edible Oil Co and Jinquan Group will be starting operations in their new processing plants in Yingkou and Changchun respectively. The two plants are expected to process a total of one million tonne of imported soy annually.

Overall, China's newly added soy processing capacities for this year will exceed 10 million tonnes.

Such a rapid expansion has led to severe oversupply situations and the subsequent decline in operating rate in China's major soy production regions, according to the National Development and Reform Commission (NDRC).

In order to have a healthy soy industry, the 2008 guidelines by NDRC proposed that soy and oilseed processing capacities should be controlled at 75 million tonnes yearly by 2010 and reduced to 65 million tonnes in 2012. However, the capacities failed to drop but had increased by 10 million tonnes from 2008 to 2009.