Soybean Import Surplus of 40 Million Tons Leaves Northeast Soybean Sales in Dire Straits

2016 is the “International Year of Pulses”, yet imported soybeans flooding into the Chinese market have left domestically grown soybeans “completely at a loss”.

Statistics from China Customs show that China's soybean imports in November 2015 stood at 7.39 million tons, and 72.57 million tons for January to November, an increase of 15.4% compared with the same period last year. Under these circumstances, domestic soybean sales channels are blocked.

“Full-year imports in 2015 are expected to exceed 80 million tons, with supply exceeding 92.35 million tons.” According to Wang Xiaoyu, deputy secretary-general of the Heilongjiang Soybean Association, calculated by population share, China should consume 52.25 million tons of soybeans, yet supply exceeds that by 40 million tons, which of course leaves domestic soybeans with nowhere to be sold.

“Soybean is an agricultural product variety with a very high degree of marketization. From the perspective of supply and demand, China's soybean costs are indeed higher than those abroad, and the market will drive overseas soybeans to flow in continuously.” He Jun, associate researcher at the Foreign Economic Cooperation Center of the Ministry of Agriculture, told the Daily Economic News reporter, “From a global perspective, expanding and deepening overseas industrial chains is worthy of encouragement.”

More than half of soybean farmers face poor sales

The domestic soybean market is undergoing a “the more it eats, the fatter it gets” game of snake.

As vegetable oil consumption rises markedly, imports surge accordingly, while at the same time China's soybean self-sufficiency rate has reached its lowest level in history.

From 2002 to 2013, China's annual vegetable oil consumption doubled, rising from less than 13.7 million tons to 28.75 million tons in 2013, while according to an article by Zhu Jing, dean of the College of Economics and Management at Nanjing Agricultural University, the soybean self-sufficiency rate has shrunk to less than 15%.

At the same time, China's external dependence on soybeans is rapidly “soaring”. According to the 2014 Soybean Market Annual Report, over the past six years, China's external dependence on soybeans has exceeded 80%, and in the 2013/14 year it reached about 86%.

In 2014, China's soybean imports stood at 73 million tons, accounting for about 20% of world soybean production, already exceeding China's share of the world population. According to Wang Xiaoyu's calculations, full-year imports in 2015 are expected to exceed 80 million tons, with supply exceeding 92.35 million tons; in 2014 the world population was 7.1 billion and China's population was 1.36 billion, with China accounting for 19.1% of the world population. World soybean consumption in the 2013/14 year was 270 million tons; calculated by population share, China should consume 52.25 million tons of soybeans, while supply is 92.35 million tons, 40 million tons more.

The surplus flow of imported soybeans has squeezed out the sales channels of Northeast soybeans that had just recently come to market.

At present, new soybeans in Heilongjiang Province have been on the market for two months, yet soybean farmers in Heilongjiang Province have sold only about 40% of their soybeans, with more than half still in farmers' hands, and most farmers are waiting to see how things develop.

“Currently domestic soybeans have high costs and are less competitive than imported soybeans, and soybean trade currently does not use quotas or other means for regulation. Judging from the policy direction of domestic agriculture's ‘transformation of methods and adjustment of structure’, the government can only regulate soybeans in the market through target price reform.” He Jun told the Daily Economic News reporter, “Therefore soybean is an agricultural product variety with a very high degree of marketization. Under these circumstances, the focus should be placed overseas, encouraging the expansion of overseas industrial chains and encouraging enterprises to enhance competitiveness through a combination of investment and trade. At present it is mainly trade-based; in the future investment should be encouraged, and through the combination of international and domestic markets, industrial chains should be deepened to compete with giants such as Yihai Kerry on the global fair market.”

Soybean bear market momentum continues

2015 was a “disastrous” year for soybeans, and this momentum will likely continue into 2016.

In 2015, soybeans saw a bumper harvest worldwide, and import prices fell accordingly. As of the end of November, the closing price of the CBOT benchmark soybean contract was 882 cents per bushel, down 133 cents per bushel from the same period last year, a decline of 13.1%.

Domestically, domestic soybeans that had just lost temporary storage support were again besieged by cheap foreign beans, prices were pushed even lower, and sales channels were poor. As of the end of November, the purchase price of national standard third-grade soybeans at weighing stations in producing areas was 3600 yuan to 3700 yuan per ton, down about 900 yuan per ton from the same period last year, a decline of 19.78%.

Analysts pointed out that because in the past two years the soybean planting area and per-unit yield levels in the world's major soybean-producing countries, the United States and Brazil, have continuously increased, and because weather was favorable for soybean growth, global soybean production has continuously hit new highs, global soybean supply is very ample, and global soybean ending stocks and the global soybean stock-to-consumption ratio remain at historic highs. The enormous supply pressure is difficult to release, becoming the dominant factor suppressing the trend of domestic and international soybean markets throughout 2015.

Analysts at Huatai Futures believe that in 2016, unless Brazil encounters extreme weather that causes a sharp decline in production, the situation of increasing global soybean ending stocks will continue. Against the background of loose global supply, U.S. soybean export demand itself is poor, and the stock-to-consumption ratio for the 2016/17 year may also continue to rise, so the judgment can be made that U.S. soybeans will run weakly.

The Ministry of Agriculture's whole-industry-chain analysis and early-warning team judges that in 2016 global soybean supply will remain very ample, and with imports continuing to increase and domestic oilseed production continuing to decline, the edible oil self-sufficiency rate in 2016 may fall to about 25%.