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Why does China need all those soybeans?

By Staff | Nov 25, 2012

“In 10 years, China will be importing 50 mmt of corn. In fact, less than 10 years.” -Gua Jia Hua, Vice general manager of Dongling (Cina's eighth largest soybean crusher)



AMES – During the past 10 years, China’s soybean imports have grown from 10 million metric tons in 2001-2002 to 59 mmt this year.

The country estimates it will need 63 mmt by December 2013, or about 2.73 billion bushels.

These estimates came from Gua Jia Hua, vice general manager of Dongling, the eighth largest soybean crusher in China. Gua presented to a room of farmers, commodity brokers and ag lenders on Nov. 15 in Ames, a meeting sponsored by the Iowa Soybean Association.

Gua told his audience that his country’s need for soybeans will continue to grow in the next several years and it will soon be adding corn to its worldwide shopping list.

“In 10 years,” Gua said, “China will be importing 50 mmt of corn. “In fact, less than 10 years.” China currently imports no corn.

This rapid increase in buying the world’s grain despite the cost is due, Gua said, to China’s economic growth in the past 30 years, more people moving from rural areas to urban, and government policy to assure there is plenty of food to feed its 1.3 billion people.

As urban areas expand, more tillable acres are lost to crop production.

Gua said China continues to add 800 million people each year, a population growth expected to peak in 2016 when the census will tally 1.6 billion. With more people, the demand for oil seeds grows for cooking.

As the middle class gets more prosperous, more meat is sought in Chinese diets, he said.

Pork continues to be the meat of choice, followed by poultry.

At the same time, the demand for livestock feed grows to produce more meat. The government, he said, has created more incentives for farmers to grow corn; the primary livestock feed choice, which has led to a loss of soybean planted acres.

Soybean production for feed has curtailed, meaning the country has been roaming the world to secure its soybean needs for a decade, and will continue to do for some years to come.

China’s domestic bean production for feed has dropped from 17 mmt in 2004/05 to 13 mmt in 2011/12 and is expected to fall to 11 mmt in 2012/13.

Gua said the bulk of Chinese soybeans, which is high in protein; go to human consumption, while U.S. and South American beans, its two primary sources, are higher in oil. So China’s imported beans are crushed for feed and commercial oil purposes.

To assure itself a steady supply of soybeans, Gua said, China has built a reserve of beans in Brazil since 2008 that now totals 7.8 mmt.

Corn situation

China’s corn crop, Gua said, will reach its maximum acres planted in 2013 at 34 million hectares, or about 81 million acres to produce 200 mmt of corn.

China’s annual yields tally between 80 to 90 bushels per acre,” said Dean Coleman, of Humboldt, an ISA director and soybean grower who has visited China during ISA trade missions. “They told us that in every stalk there are at least two corn borers.”

He said farmers there are resistant to using GMO hybrids.

With demand out-running production in past several years, Gua said, by December 2013 China’s domestic carryover will be at 15 percent.

“That is about one month’s supply,” Gua said, adding he does not expect domestic production to increase significantly because “to plant more corn, we would lose soybean acres and have to import more soybeans.”

So within a few years, China will be shopping for corn primarily from the U.S. and Thailand, which are two countries the government has authorized for purchasing corn.

To stretch its corn supply, Gua said, the government has scaled-back its ethanol production and ended incentives for processing corn for industry starch production.

It is also working to encourage fewer small pork operations and switching to larger confinements, offering farmers incentives to use confinements for biosecurity and keeping diseases in check among hog farms.

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