October 31, 2013

China's soy imports may reach new high in 2013-14

Following a drop in domestic output and greater demand for animal feed and edible oil, China's soy imports are likely to rise to a new high in the September 2013-August 2014 market year.

Heilongjiang Province in Northeast China, the nation's largest soy producer, has endured heavy rain and flooding over the past four months. There are more than 235 million hectares of soy farmland, which had an output of 4.64 million tonnes in 2012, according to Heilongjiang's agriculture commission.

"The adverse weather conditions have severely undercut Heilongjiang's soy production this year and will force China to import more foreign soy to meet its domestic demand," said Hu Zengmin, an analyst at the China National Grain and Oils Information Centre in Harbin.

According to Hu, China's soy imports in 2013-14 are likely to rise by 15% from the previous market year, making 10 consecutive years of rising soy imports. Soy imports rose 11.2% to 58.4 million tonnes in 2012 from a year earlier, while prices were up 5.8% on-year to US$599.30/tonne, according to the General Administration of Customs.

Hu said Heilongjiang's soy production may drop by between 650,000 and 500,000 tonnes this year.

The grain and oils information centre forecast that China's soy output would fall by up to 2.6% to 12 million tonnes from a year ago, which would mark the third year running of declining output.

The USDA also forecast China's soy imports to hit 69 million tonnes in the 2013-14 market year, a 16% increase over the previous year.

Zhang Xiaoping, director for China at the US Soy Export Council, said that because the price of corn has remained high, many farmers in Heilongjiang switched from growing soy to corn, even though the latter crop costs more to cultivate. Data show that the declining cultivation of soy in Heilongjiang has been because of higher corn prices as well as government guarantees of minimum purchase prices.

Farmers in Northeast China can get between RMB9,000 (US$1,470) and RMB12,000 (US$2,000) per hectare from corn, while soy earn them only RMB7,500 (US$1,230) per hectare.

In September, China imported 17.7 million tonnes of soy from the US, an increase of about 18% over the same period last year. It bought 21.5 million tonnes of soy from the US in the 2012-13 market year. Xiaoping expects it will import between 22 million and 24 million tonnes of US soy in the next market year.

China did not become a major international soy market until the 1990s. Rising financial capability and the desire to improve the nation's diet by raising the consumption of pork, poultry, eggs and vegetable oil have pushed China to become the world's largest importer and consumer.

In order to further meet domestic demand, China National Cereals, Oils and Foodstuffs Corp, China Grain Reserves Corp and Chinatex Corp signed a number of deals with US grain traders Archer Daniels Midland Co, Bunge Ltd and Columbia Grain to import 4.83 million tonnes of their soy in late September. Those beans will be shipped to China between now and next March.

Xiaoping said South America's weather conditions and infrastructure will play a key role in determining the size of their soy exports to China, especially regarding Brazil's and Argentina's efforts to improve road and port facilities. The soy sector covers a range of businesses that involve food and oil processing, production, animal husbandry, chemical fibre and other industries.

"With difficulties concerning land, water resources and temperature conditions, it is hard for China to meet the growing demand for soy domestically. Under such circumstances, it must buy soy from large foreign sources," said Ding Lixin, a researcher at the Chinese Academy of Agricultural Sciences in Beijing.