China's soybean imports to set record in 2011-12

by Agrimoney.com

Growth in China's imports of soybeans is to slow next season – but not by much, boosted by falling domestic crop and a growing need for animal feed, US officials said, in a report casting doubt on talk of a cut in import tariffs.

The world's biggest soybean importer will buy in 58.0m tonnes of the oilseed in 2011-12, some 5.5% more than in the current season, US Department of Agriculture attaches in Beijing said.

While representing a slowdown on the pace of growth in 2010-11, the figure would set a record, and keep the pressure on supplies from America, the top soybean exporter.

Indeed, the attaches forecast that China's soybean imports from America would reach 27.0m tonnes (992m bushels) next season, a rise of 2.0m tonnes (73.5m bushels) – more than the US is currently expecting its production to rise by.

As an extra sign of the pressure facing US stocks, the attaches' estimated that China would import 25.0m tonnes of American soybeans in 2010-11, a figure 1.0m tonnes higher than the official USDA estimate, which will be updated on Thursday in the department's latest flagship Wasde report on world crop supply and demand.

Consolidation boost 

The attaches attributed their upbeat estimates to the strong demand for both soybean products – soyoil, for which consumption is being directly boosted by Chinese consumers' growing wealth, and soybean meal, which is feeling the demand indirectly, through a growing appetite for meat.

The growing demand for meat is spurring the consolidation of livestock producers into industrial enterprises keener to buy soymeal than small-time farmers.

"The Chinese animal production sector is implementing structural changes which will positive impact protein meal feed demands," the attaches said in a report, quoting official data that two-thirds of hog farms were of a size to slaughter more than 50 animals a year, compared with 37% in 2005.

"Soybean imports will show steady growth in the foreseeable future because of the strong and growing demand for protein meals and vegetable oils."

Soybeans vs corn and cotton 

However, domestic farmers were to put less ground to soybeans this season, preferring grains, which attract greater levels of government support, and higher value horticultural crops.

"The profit from soybeans is estimated at $600 per hectare, compared with $600-1,000 per hectare for corn," the briefing said.

In eastern Chinese provinces, such as Hebei and Shandong, "soybean planting areas is expected to lose ground to cotton and corn", and to fall 10% in neighbouring Henan.

The report added that soybean growers' "competitiveness continues to be undercut by low yields and poor efficiency", with a lack of crop rotation believed to be keeping yields at a little over half US levels of 3 tonnes per hectare.

Too soon for tariff cut?

The attaches also proposed that China would not imminently lower tariffs on soybeans and soyoil from 9% to 3% - speculation over which lifted Chicago prices of both commodities last week – despite the help such a reduction might be in the battle against food price inflation.

"The agriculture sectors and governments in the major soybean producing provinces are likely to challenge this proposal, and it remains unclear whether the government would approve a proposed tariff rate cut at this moment," the report said.

"Reducing tariffs to lower prices could appease consumer angst about rising food prices, but a 3% tariff... is unlikely to impact the current large volume of trade.

"Facing a growing supply and demand gap for oilseeds, the government is likely to maintain the current trade and industry development policy in 2011-12.

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