August 25, 2006

 

Domination of China's soy sector by foreign companies raising concerns

 

 

Greater demand for soy in China is, ironically, causing consternation among farmers in China's Heilongjiang provinces as prices have dropped by more than a-third in two years as cheaper imported soy flooded the market, industry sources said. 

 

At the same time, analysts are worried that too much of China's soy crushing capacity has been ceded to multinational agribusinesses.

 

China's soy imports have soared from just 800,000 tonnes to 26.5 million tonnes in the decade since the country allowed foreign access to its soy market.

 

China's entry to the WTO in 2001 allowed foreign agribusinesses to buy up soybean crushing capacity in China, and purchases intensified two years ago. Currently, foreign businesses own about two-thirds of the soy crushing companies in China, even though estimates say that only half the number is actually in operation due to over-capacity.  

 

Still, the four international companies that control nearly 40 percent of China's soybean crushing capacity, Cargill, ADM, Bunge Ltd, and Louis Dreyfus show no signs of slowing down. 

 

By dominating the crushing sector, international agribusinesses could sell more foreign soybeans in China, which are often supplied by their own subsidiaries, said an industry insider. The four companies, which have almost total control over the soy market in South America, can easily supply low-priced soy to China.

 

Now, almost all foreign joint-venture companies in China use imported soy, creating demand but at the same time pushing down prices.

 

China became a net importer of soy since 2002. Since then, its soy production has fallen from 18 million tonnes in 2004 to 16 million tonnes in 2005 in the face of mounting imports. Imports reached 26.5 million tonnes in 2005, far above local production.

 

Genetically modified (GM) soybeans from the United States, now hold the lion's share of China's soy import market and have caused prices to fall as much as 25 percent in recent years, said Ding Shengjun, an expert with the Academy of State Administration of Grain.

 

The price-fall has slashed farmers profits to a bone-thin level. On top of that, preference for imported soy meant that more than 20 percent of China's soy output last year remained unsold.

 

Academics in China are calling for the government to rescue the soy sector from foreign domination, said Wang Lianzheng, former minister of agriculture in July.

 

Suggested measures include incentives to soy farmers and local agribusinesses and stricter supervision of imported GM soybeans.