Rapeseed Production Halved, China May Repeat the Soybean Industry's Mistakes

Anhui is a major rapeseed-producing region in China, and Hefei, Chuzhou and Lu'an in central Anhui are key rapeseed-growing areas. Zhang Yongwen, a large-scale farmer in the area, told reporters that few people there now grow rapeseed, with wheat and rice being the main crops.

A procurement manager at a large grain and oil processing enterprise in Anhui told reporters that rapeseed cultivation in Hefei, Chuzhou and Lu'an has basically disappeared. Although rapeseed output in southern Anhui has increased somewhat, calculated from 2008 to 2015, Anhui's total rapeseed area should have decreased by 60% to 70%, and annual rapeseed output has fallen from a peak of about 1.5 million tonnes to around 500,000 tonnes now. Anhui's rapeseed output used to rank second nationwide, and has now dropped to third.

Hubei is still China's largest rapeseed-producing region. A relevant person at a grain and oil company in Hubei introduced that in 2008, Hubei's rapeseed planting area was about 17 million mu, with output of about 2.19 million tonnes; this year Hubei's rapeseed planting area is expected to be 9.6 million mu, with output of about 1.06 million tonnes, a decline of more than 50%, similar to Anhui.

The above person said that in 2008, the national annual rapeseed output was 12-13 million tonnes, a figure the oilseed industry still largely accepts, and total output now is expected to have fallen by about half compared with 2008.

The United States Department of Agriculture has given vastly different figures.

The latest report released by the USDA in June this year shows that from marketing year 2011/12 to marketing year 2015/16, over five marketing years, China's rapeseed output was 13.426 million tonnes, 14.007 million tonnes, 14.458 million tonnes, 14.6 million tonnes and 14.2 million tonnes respectively. According to USDA figures, China's rapeseed output has been stable with some increase over the past few years.

A veteran grain and oil industry figure said the reason the USDA gave the above figures is mainly that it used data from institutions with official Chinese backgrounds. An analyst commented on this: “There is indeed a big gap between official and institutional survey data on rapeseed output. In fact, the temporary storage volume shows that the official data is heavily inflated.”

The Hubei Rapeseed Office announced that in 2014, various grain enterprises in 12 major rapeseed-producing regions including Hubei and Sichuan purchased a cumulative total of 3.49 million tonnes of summer rapeseed, a decrease of 2.67 million tonnes from the same period last year, a decline of 43.34%. Among this, the purchase volume for temporary storage of rapeseed was 2.15 million tonnes, a decrease of 2.36 million tonnes from the same period last year, a decline of 52.33%. Using the national temporary rapeseed stockpurchase volume to infer national output, industry insiders believe the accuracy of official data must be seriously questioned.

The more support, the more shrinkage

Since 2008, China has increased support for staple crops such as wheat and rice, and also implemented temporary storage and purchase for rapeseed, but the degree of benefit was lower than for other crops, leading to results contrary to intentions, with the rapeseed industry shrinking the more it was supported.

The returns from rapeseed are substantially lower than those from wheat. In Hubei, Anhui, Jiangsu and other places, winter fallow fields can be used to grow either rapeseed or wheat. Taking Hubei as an example, market participants say the return from rapeseed is 100-200 yuan per mu, but the return from wheat is about 500 yuan per mu, far ahead of rapeseed. In recent years, many more fields have abandoned rapeseed in favour of wheat or cash crops such as mustard tuber.

Under the rapeseed temporary storage and purchase implemented in recent years, the purchase price set by the state is far higher than the international market, so cheap imported rapeseed and rapeseed oil have flowed into China in large quantities, weakening processing enterprises' incentive to use domestic rapeseed.

A report by the Hubei Rapeseed Office said that since September 2013, the duty-paid cost of rapeseed imported from Canada has long been stable at around 4,200 yuan/tonne. In October 2014 it once fell to a trough of 3,600 yuan/tonne, and although it then stopped falling and rebounded, it overall remained at a relatively low level. Compared with the long-term stable price level of domestic rapeseed at around 5,100 yuan/tonne, imported rapeseed has a price advantage of at least about 1,000 yuan/tonne.

At present, the price of imported non-GMO rapeseed oil is about 6,600 yuan per tonne, while the price of rapeseed oil in the Sichuan market is around 13,000 yuan, giving imported rapeseed oil an absolute price advantage. Along the Yangtze River basin, a major rapeseed-producing and consuming region, many processing enterprises along the route are in a state of shutdown.

The way out for domestic rapeseed

Domestic rapeseed and domestic soybeans are currently in a similar situation, with output falling sharply, a weak and sluggish processing industry, and a lack of vitality upstream and downstream in the industrial chain.

The only bright spot is that in Sichuan, Yunnan, Guizhou, Hunan and other regions where Sichuan cuisine and Hunan cuisine are popular, market demand for strongly fragrant rapeseed oil remains robust. Imported rapeseed oil does not have the strongly fragrant characteristic, so in Sichuan and other places, rapeseed planting area and output have remained relatively stable, and the price of strongly fragrant rapeseed oil can be maintained at a high level of around 13,000 yuan per tonne, but problems such as blending with other non-strongly-fragrant edible oils and inadequate control of toxic and harmful substances are prominent.

Tu Changming, oil director at Yihai Kerry, told reporters that to revitalise the domestic rapeseed industry, first the market price of rapeseed must align with international prices, and second the characteristics of domestic rapeseed must be brought into play by developing strongly fragrant rapeseed oil in a regulated way.

As of now, the state has not carried out temporary storage and purchase of rapeseed this year, and rapeseed prices in Jiangsu and other places have fallen to around 3,400-3,600 yuan per tonne, already close to the price of imported rapeseed, and processing enterprises are preparing to enter the market to buy. On the issue of safeguarding farmers' incomes, market participants suggest giving farmers direct subsidies, with rapeseed still sold at market prices, so that processing enterprises can get running. In previous years, the excessively high temporary storage price of rapeseed made processing enterprises afraid to enter the market, and large amounts of rapeseed oil pressed from excessively high-cost rapeseed could only sit in the state treasury, tying up large amounts of state funds and becoming unsustainable.