August 2, 2018

 

China's alternatives to deal with costlier US soybeans due to US-China tariffs

 

 

China's livestock sector would potentially be burdened by costlier US soybeans, but Chinese pig farmers and analysts believe there are other ways to mitigate the impact.

 

In light of tit for tat tariffs between the US and China and the increased risk of a trade war, Li Xueyam, head of the purchasing department of Xinda Muye, a farming company in Henan, told the South China Morning Post that changing animal diets and seeking alternatives to soybean meal can help cope with higher soybean prices.

 

According to Li, Chinese pig farms are witnessing a spike of up to CNY36 (US$5.30) for raising one hog, which usually take five to six months. This figure amounts to an overall CNY28.8 million (US$4.8 million) for a company like Xinda Muye.

 

The rise in prices has been attributed to China's action to impose a 25% tariff on US soybeans, a common ingredient for pig feed.      

 

Still, Li is optimistic that his company will endure through uncertain days, "but our profits will be somewhat affected."

 

So far, analysts are supportive of Li's measures to deal with increased input costs. Feng Yonghui, chief analyst from pig farming website Soozhu.com, said that changing the formula of feed would be a more effective measure.

 

"We have plenty of replacements for soybean meal as a source of protein, such as peanut meal, cotton meal and rapeseed meal," Feng remarked.

 

Another alternative would be the amino acid, lysine - which China produces half of the global supply – to replace soybean meal.  

 

Analysts also suggested getting more imports from other countries, promoting local planting of soybean crops and other administrative interventions to cushion the impact of tariffs.

 

In fact, China has brought in more soybeans than necessary and could do without US imports in the short term, said Ma Wenfeng, an analyst from Beijing Orient Agribusiness Consultant. He pointed to a surplus of 32 million tonnes of beans, which was unnecessarily consumed and close to the amount of imports from the US. This rate of consumption and import also influence the Chinese corn meal supply: as farmers use less corn meal, state reserves possess an adequate amount of the ingredient which could be used to feed animals.

 

Additionally, other countries, namely Brazil, Canada and Russia, could serve as China's alternate suppliers of soybeans, other than the US.

 

"We can ensure normal consumption of soybeans even if we completely stop importing soybeans from the US amid the trade dispute," Ma said. "To use soybeans as a tool to fight back against the US' tariffs will not lead to irreparable losses to domestic farmers."

 

Moreover, China's central government announced that the subsiding of soybean and corn growers in key producing provinces would continue, with higher subsidies especially for soybean growers.

 

While US soybeans may be more expensive for Chinese farmers in the future, China is not expected to cease importing soybeans from the US, South China Morning Post's Mandy Zuo wrote.

 

Also, in order to avoid paying tariffs, exporters could deliver US soybeans to China through a South American port, Feng said.

 

- South China Morning Post