September 18, 2013

 

 

About 80% of China's annual demand for soy is crushed into meal to produce oil and feed for farmed animals and fish, and only about 20% is directly used for food such as traditional tofu, soy milk, or the seasoning soy sauce.

 

"The biggest demand is for soymeal, which is mainly used in animal feed," said Zhang Lanlan, an analyst at Sublime China Information Co. "Demand for oil and animal feed is increasing given China's urbanisation and population," she added.

 

Last year, Chinese farmers grew around 12.8 million tonnes of soy, preferring alternative crops yielding better profits, while the country imported 58.38 million tonnes, up 11.2% from 2011, official figures show.

 

According to consultancy Beijing Orient Agribusiness, the US was China's top soy supplier in 2012 with 44% of imports, closely followed by Brazil at 41%, and Argentina in third place with 10%.

 

For the current crop year, the USDA estimates China will import 63 million to 67.5 million tonnes, with domestic production stable at 12 million tonnes. According to USDA figures, over 90% of the soy grown in the US is genetically modified. But while Chinese producers -- who are concentrated in the northeast of the country -- are barred from using GM seeds, Beijing allows the import of 11 varieties of GM soy, including three approved in June.

 

There has been scant debate in China over GM foods, despite concerns over food safety following a series of scandals.

 

International soy prices surged late last year but have fallen back in recent months and on China's Dalian Commodity Exchange, the benchmark soy futures contract for November delivery closed at RMB4,471 (US$730) per tonne on Tuesday (Sep 10).

 

Analysts said that demand for soy is holding up even as economic growth slows in China. Gross domestic product grew 7.8% in 2012, its slowest pace in 13 years, and expansion could weaken further this year.

 

Gao Yanbin, an analyst at Jinshi Futures, said: "When the economy is slowing down, demand for agricultural products is definitely restrained, but this is not especially obvious. China's economic environment is bad but China's consumption of food is, on the contrary, increasing," he added.

 

Earlier this year when China's outbreak of H7N9 bird flu killed more than 40 people and decimated poultry consumption, soy demand did suffer a setback. But the poultry sector is now recovering, so purchases of the soymeal used in feed are picking up, analysts said.

 

Analysts added that the trend is set to continue with China's domestic soy crushing industry hitting an annual capacity of more than 100 million tonnes, showing the Asian giant has an appetite for far more.