FBA Issue 5: November / December 2005


Perspective: Soy

Crunch time for crush


by Ann ZHANG

UNLIKE China's corn production, which can hardly keep up with soaring demand, the reverse is probably true for soybean crushing in China.


As of early 2005, there were 169 crushers in China with a daily output above 200 tonnes each, or a combined daily output of 233,700 tonnes, according to China's National Vegetable Oil Association. Of these, 90 crushers had a daily output exceeding 1,000 tonnes, or a total annual crush of 59.2 million tonnes. This alone accounted for 84.4 percent of China's total crush output.


Annual domestic soymeal demand, however, is a mere 30 million tonnes, or half the 70.1 million tonnes of soymeal produced each year. The recent opening of more crush facilities with daily capacities of at least 1,000 tonnes has only worsened the oversupply.


What is noteworthy is that despite the supplies flooding the market, China's crush factories remain grossly under-utilised. Based on eFeedLink's estimates, Chinese crushers operated at an average of 43 percent of full capacity in the first half of 2005, with fewer than 20 crush productions attaining at least a 70-percent capacity. A regional breakdown shows the majority of crushers in the north-east operating at an average of 60 percent of full capacity. For the north, east, south and south-west regions, crush capacities average 50, 42, 38 and 36 percent of full capacity respectively.


Besides being inefficient, under-capacity translates to idle facilities which add to unit cost of production and contribute to the cash-flow problems common among many Chinese crushers. As competition continues relentless in the domestic crush business, many soymeal producers have reacted to lower prices and profits by increasing their own imports of soybean, in the hopes that doing so will help maintain their levels of production and income. Such "blind expansion", say analysts, have only worked against the industry's favour. By increasing imports of soybeans and keeping output up, the collective actions of individual crushers have forced down the price of soy products in an already saturated market.


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