Northeast China's soybean industry in crisis: can the direct subsidy policy save it?
Soybean planting area continues its overall downward trend
During on-the-ground research, reporters learned that compared with last year, Heilongjiang's soybean planting area is still declining this year. However, affected by the sustained low-temperature and humid weather earlier in the season, some low-lying areas have not yet sown corn and can only switch to soybeans later. In addition, some corn varieties are prone to seed rot, which will also prompt some farmers to switch to soybeans. Overall, with corn planting returns clearly higher than those of soybeans, the downward trend in soybean planting area is still continuing.
⟦NL> In Xigangzi Village, Xigangzi Town, Aihui District, Heihe City, local farmers told reporters that four years ago the entire village planted soybeans, but in recent years they began switching to corn. Last year corn already accounted for the vast majority of plantings, with very few soybeans. By this year, basically no one in the village is planting soybeans. Last year's soybeans in the village are still piled up, amounting to about 10 percent. Many farmers did not sell when soybean prices peaked at 2.1 yuan/jin last year, and later the price fell to 1.7 yuan/jin, causing serious losses for soybean farmers.
Molidawa Banner in Inner Mongolia and Qiqihar in Heilongjiang are traditional major soybean-producing areas. In the past, local farmers mainly planted soybeans, but in the past two years the soybean planting area has declined markedly, especially with a larger drop this year. Last year the local corn harvest was good, and with state purchasing and storage, farmers' planting returns were relatively high, while most soybean farmers had poor returns or even losses. This year the corn planting area in these regions is very likely to peak, while the soybean planting area will reach a point where it cannot fall any further.
However, in Nenjiang County, Heilongjiang Province, the continuous decline in soybean planting area has been curbed. Nenjiang has long enjoyed the reputation of "Soybean City," and its soybean output once accounted for about one-eighth of Heilongjiang's total soybean output. According to Li Zhiqiang, general manager of Nenjiang County Jiaye Agricultural and Sideline Products Co., Ltd., Nenjiang County's soybean planting area is expected to increase by 10%-15% this year. The main reason is that corn yields in the past two years fell short of expectations, with few plots exceeding 20,000 jin per hectare. Moreover, Nenjiang's soil is mainly sandy, and the Demeiya corn seed, which performs well on black soil, does not seem well suited to planting there.
In addition to soil quality and accumulated temperature factors, policy drivers are also an important reason for the rebound in Nenjiang's soybean planting area. "The Jiusan Management Bureau holds a soybean festival in Nenjiang County every year. Last year, because farmers switched to corn on a large scale, soybeans were hard to see during the soybean festival, and the title of Soybean City became somewhat undeserved. This year, governments at all levels in Nenjiang County are vigorously promoting soybean planting. If the soybean direct subsidy is included, the planting returns for Nenjiang soybeans are about the same as those for corn, and with policy support, Nenjiang's soybean planting area is expected to rebound in the coming years," Li Zhiqiang said.
The direct subsidy policy has limited incentive effect on farmers
In November 2014, the National Development and Reform Commission, the Ministry of Finance, and the Ministry of Agriculture jointly issued the 2014 soybean target price policy for Northeast China and Inner Mongolia, which meant that the temporary purchasing and storage policy that had been implemented for 6 years was cancelled.
During the inspection, when reporters asked farmers about their views on the soybean direct subsidy policy, many farmers said they did not know about the direct subsidy policy, and some who knew about it were worried about its continuity. "We worry that there will be subsidies this year but none next year. Returns were already low or even loss-making to begin with, and once the subsidy is gone too, for farmers it means another year of working in vain," a farmer surnamed Zhou from Hongxin Village, Baoqing Town, Baoqing County, Shuangyashan City, Jiamusi, told reporters.
Some soybean growers also believed that the soybean direct subsidy policy was not strong enough, and that the subsidy was too small to significantly raise soybean planting returns, greatly dampening farmers' enthusiasm for planting soybeans.
According to reporters' understanding, Heilongjiang's soybean target price direct subsidy standard has been officially announced at 60.5 yuan/mu. If calculated based on an average soybean yield of 250 jin/mu, this is equivalent to a subsidy of about 480 yuan per ton of soybeans. Calculated at the soybean target price of 4,800 yuan/ton, after deducting the 480 yuan/ton subsidy, the soybean spot price should be 4,320 yuan/ton. But it is understood that most farmers cannot sell soybeans at this price, and even if they could, the net returns from soybean planting would still be lower than those from corn. Therefore, at present, the target price subsidy policy that has just begun implementation has no obvious effect on raising farmers' enthusiasm for planting soybeans, and the soybean planting area still shows a shrinking trend.
Li Zhiqiang also told reporters that in the Nenjiang area this year the soybean subsidy is 60.5 yuan per mu, and the rule is to subsidize the landowner rather than the tenant.
The person in charge of Jiqing Soybean Industry in Jiamusi City believed that this year's Heilongjiang soybean subsidy standard is far below the 120-150 yuan/mu level expected by farmers and the soybean industry. "The relevant departments' estimated soybean sales price was on the high side. After last year's autumn harvest, the soybean market price was 2.05 yuan/jin, but later fell sharply to as low as 1.7 yuan/jin. Choosing a relatively high sales price as the subsidy benchmark led to the subsidy being too low," the person in charge said.
During the inspection, reporters found that last year the soybean planting area initially reported to the government in Heilongjiang was on the low side, and later there were supplementary or false reports, which together shared the already-distributed soybean direct subsidy funds. This reduced the subsidies received by farmers who actually planted soybeans and to some extent also affected farmers' enthusiasm for planting soybeans.
A farmer in Hegang City told reporters that there were unfair practices when the subsidy amounts were implemented, with some falsely reporting planting area, causing some farmers' shares to be reduced. In addition, disbursement was slow. By May of this year, farmers had already begun the new year's production, yet the subsidy funds had not yet been paid out, which had a certain impact on the preparation of production funds.
In fact, even with the support of the direct subsidy policy, the planting returns for soybeans are still far lower than those for corn. This year the Northeast region continues to implement the soybean direct subsidy policy, but its incentive effect on farmers is limited, and farmers still prefer to plant corn and rice.
Russian soybeans may hit the domestic market in the future
During this inspection, reporters learned from traders and farmers that, considering the cost of renting land, many farmers choose to travel far to Russia to rent land and grow soybeans, then ship the soybeans back home after harvest. Despite facing relatively high tariffs, the cost of growing soybeans in Russia is still lower than that of domestic soybeans.
Russian soybeans and domestic soybeans are both non-GMO soybeans with relatively high protein content, suitable for use as protein soybeans, but they differ slightly in appearance from domestic soybeans. Many domestic oil mills prefer to use relatively cheap Russian soybeans for production.
"The cost of growing soybeans in Russia is 0.7-1 yuan/jin. Adding tariffs, the cost is less than 1.8 yuan/jin, far below the quote of around 2 yuan/jin for Northeast soybeans at the beginning of the market season, giving it an obvious price advantage. This leads traders and processing enterprises to favor Russian soybeans under conditions of equal quality." According to the person in charge of the Heihe City Soybean Industry Association, it is expected that about 100,000 tons of Russian soybeans will be imported through the Heihe port this year, and the total volume of Russian soybeans flowing into China through various channels will be about 500,000 tons, accounting for about 5% of domestic soybean output.
A soybean grower from Santun Village, Sancun Town, Tongjiang City, Jiamusi, told reporters that the local area is only 10 kilometers from the Russian port, and Russian soybeans have a very large impact on the region. Many farmers in the village go to Russia to contract land and grow soybeans, and one household can plant over a thousand hectares of soybeans, while local farmers' soybean planting area is generally around 20 hectares.
The person in charge of the Heihe City Soybean Industry Association told reporters that last year soybean planting in the Aihui area of Heihe accounted for about half of the local crop planting area, but this year it fell to less than 20%, while the corn planting area increased substantially. This was mainly because last year's corn harvest was abundant, with planting returns reaching 8,000-10,000 yuan per hectare, far higher than soybeans. As of May 21, all sown plots in the area had been planted with corn, and soybean sowing had not yet begun. Unsown plots would later choose soybeans only if corn could not be planted.
The person in charge also said that leasing land in Russia to grow soybeans has already begun to take shape. When domestic prices are suitable, some Russian soybeans are sold back into China. Because Russian soybean imports are currently subject to targeted management (requiring purchase contracts from oil mills or protein processing enterprises), import volumes are limited. The current port arrival price of Russian imported soybeans is 3,600 yuan/ton, which does not have much advantage compared with domestic soybeans.
However, reporters learned from traders that although the volume of soybeans imported from Russia may currently be relatively limited, domestic land costs remain high, and in the future more farmers will choose to rent cheap land in Russia to grow soybeans. China's soybean planting area and farmers' enthusiasm for planting will inevitably be affected. At present, soybean planting area in Heilongjiang areas such as Jiamusi, Baoquanling, Tongjiang, and Hongxinglong is falling rapidly, already creating an impact on the soybean industry.