China: Ambitious plans for soy self-sufficiency

by Suzi Fraser
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By Suzi Fraser Dominy

Burgeoning economic growth in China is creating better living standards for many people and driving demand for meat and fish, and as a consequence, for soybeans for use in animal and aquatic feeds.

Crushing plants under construction or just built will raise crushing capacity by as much as 27% this year, to 57 million tonnes, the country’s State Grain Bureau said in January. In the past three years the Decatur, Illinois, U.S.-based Archer Daniels Midland Company alone has entered joint agreements with the Chinese government to operate 12 plants in China. This year it announced a 50-50 joint venture with Singapore-based Wilmar Holdings to build a new facility in Shanhaiguan, near Tianjin, east of the capital Beijing.

The crushing industry continues to segment between the large crushers of mostly imported soybeans, located primarily in the southern coastal areas, and the smaller crushers of domestic soybeans in the principal soybean growing regions in the Northeast.

In 2002 China imported 11.48 million tonnes of soybeans from Brazil, Argentina and the U.S., with a value of U.S.$2.3 billion. Chinese officials say they expect the amount to increase by at least 50% this year.

Meanwhile, the Chinese government has plans to offset imports with increased plantings and an ambitious long-term plan to become the world’s largest producer of non-genetically modified soybeans. In 2002-03, China’s soybean production is forecast to expand to a record 16.6 million tonnes, up 6% from last year, and up 59% from 10 years ago. Over the next five years, 127 counties in the northeastern provinces of Liaoning, Jilin and Heilongjiang, as well as the northern region of Inner Mongolia will be transformed into high yielding, high oil-content, non-GMO soybean land, the Chinese Agriculture Ministry says.

However, there is a question mark over the ability of transportation and marketing infrastructure to cope: despite transporting record volumes of soybeans in recent years, the Chinese rail system is inadequate for transporting the large volumes of commodities from the interior northeast provinces to markets in coastal cities. According to the USDA, the Ministry of Agriculture has stated publicly that it is committed to improving the transportation and marketing infrastructure, though plans appear to be undefined.

Added to transportation difficulties is the lack of an organized marketing system. With no system of local silos to do the consolidating, independent buying agents usually carry out the task. The USDA says agents generally have little or no ability to separate or grade soybeans. Enforcement of contract terms is difficult, and crushers report serious problems with variations in quality or delivery time for domestic soybeans.