China's soy crop to fall twice as far as expected

by Agrimoney.com

China's soybean harvest will decline twice as far has had been thought this year thanks to the better returns to be had from other crops, which will cut area devoted to the oilseed to the lowest of the century.

China's soybean harvest will fall by roughly 800,000 tonnes to 14.4m tonnes, US Department of Agriculture attaches in Beijing said.

The deeper cut than acknowledged in an official USDA estimate of a 14.8m-tonne harvest reflects the greater profits achieved in corn in 2010-11, at an average of $700 per hectare, than from soybeans, which earned farmers $500 a hectare.

"The difference has negative impacted some soybean planting decisions for 2011-12," the attaches said in a report.

Alternative crops

In the important producing province of Heilongjiang sowings are expected to tumble by 10-20%, particularly in central areas "where weather and growing conditions provide farmers more choices for grain crops", the briefing said, quoting information from "industry sources".

In other provinces, soybeans are expected to lose out to cotton, for which national sowings are expected to increase by 6.6% to 5.4m hectares, the China Cotton Association said on Thursday. The estimated rise in cotton area is, nonetheless, smaller than a 9.8% rise forecast in January.

China's overall soybean area, on a harvested basis, was pegged at 8.5m hectares, 200,000 hectares lower than the current USDA estimate and the lowest since 1999.

Import impact

The extent of the decline will exacerbate a production deficit in China, the world's top soybean consumer and importer.

Indeed, the attaches stuck by an estimate of 72.5m tonnes for soybean use in 2011-12, "due to increased use of oilseed byproducts in animal production, and higher vegetable oil consumption" as wealthier consumers eat more and better.

Consumption of all protein meals is expected to rise by 6% to 65.6m tonnes, fuelled by rising hog production, which has hit a three-year high.

However, the attaches declined to raise their forecast for China's soybean imports in 2011-12, standing by an estimate of 58.0m tonnes, of which 25.0m tonnes are expected to come from the US, and viewing the extra shortall being made up from inventories.

On target

China's soybean imports are a matter of market sensitivity, given their scope, accounting for nearly 60% of total world buy-ins.

The country imported 5.4m tonnes of soybeans in May, sufficient to keep the country on track to meet a USDA forecast for 2010-11 lowered to 54.5m tonnes.

US shipments export sales and shipments in the latest week were, at 412,000 tonnes and 163,000 tonnes respectively, above the pace needed to meet USDA forecasts.

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