“The main reason for the substantial increase in soybean imports is that my country’s breeding industry, especially live pig breeding, has continued to recover quickly,” said Huang Hanquan, director of the National Development and Reform Commission’s Price Cost Investigation Center. At the end of 2020, the number of live pigs and breeding sows in my country increased by 31.0% and 35.1% respectively over the end of the previous year, basically returning to more than 90% of the pre-ASF epidemic. The main use of imported soybeans is feed, and the strong demand for feed (soybean meal) has driven soybean imports to a new high. In addition, due to the uncertainty and instability of the soybean trade supply chain brought about by the new crown pneumonia epidemic and the expected price increase, some companies have advanced their import rhythm and increased reserves.
Our country is the largest soybean consumer in the world. At present, my country’s annual soybean consumption is over 100 million tons, and there is a gap between production and demand of more than 90 million tons. In 2020, soybean imports exceeded 100 million tons, effectively making up for the gap in production and demand in the domestic market. Zhang Lichen, vice chairman of China Soybean Industry Association and general manager of the Strategic Development Department of Heilongjiang Agricultural Investment Group, believes that my country’s soybean market has formed two relatively independent markets for food and feed. Domestic soybeans are mainly used for food, processed soybean products and soybean protein. Imported soybeans are mainly used to meet the domestic demand for vegetable oil and protein meal. 20% is processed into oil and 80% is processed into soybean meal.
Although the domestic supply of soybeans is intact, global soybean prices have continued to rise since the beginning of last year. The CIF price of imported soybeans has reached more than 3,200 RMB per ton, the price of domestic soybeans has reached 5,700 RMB per ton, and the price difference between domestic and foreign soybeans has reached more than 2,000 RMB.
From the perspective of the international market, global soybean prices rose by 20% to 30% year-on-year last year, mainly due to the adverse weather in the soybean production areas in the United States, and soybean production and stocks are expected to be lowered; the weather in the soybean production areas in South America is still relatively dry, and planting is affected to some extent. It has triggered expectations of reduced soybean production in South America, especially Argentina, and global soybean prices will remain high in the later period. “International soybean prices continue to rise, driving the increase in the cost of imported soybeans in my country.” Huang Hanquan said.
From the perspective of the domestic market, the price of soybeans continues to rise due to edible demand. After Xindou went on the market last year, traders and processing companies actively entered the market for purchases, and the price of domestic soybeans went up. “At present, the Spring Festival is approaching, the demand for meat and soybean products is increasing, and the epidemic situation of company stocking and market replenishment in sales areas has increased concerns about poor transportation, which supports the increase in soybean prices.” Heilongjiang Provincial Food Industry Alliance Deputy Secretary-General, Heilongjiang Said Wang Xiaoyu, deputy general manager of Baqi Grain and Oil Co., Ltd.
Enhance the control of the global soybean supply chain
Soybeans are my country’s largest agricultural products with the earliest opening up, the largest import volume, the highest degree of marketization, and the most thorough international integration. Since the reform and opening up, my country has turned from the world’s largest soybean exporter to the world’s largest soybean importer. Imports have increased from 1 million tons in 1995 to 100 million tons in 2020, a 100-fold increase in 25 years. At present, my country’s soybean imports account for 60% of the total global soybean trade, but there is no corresponding right to speak and price in the international soybean trade. The more soybean imports, the higher the price is.
A moderate import policy for soybeans is an important part of ensuring national food security. However, my country’s soybean imports are currently facing many challenges: First, the source of imports is highly concentrated. Soybeans from Brazil, the United States, and Argentina account for more than 90% of imports. Soybean import prices are easily affected by the export policies and output of these countries; the second is soybeans. The international trade situation is complicated. Since 2018, Sino-US trade frictions have been escalating, and soybeans have become one of the focuses; third, the epidemic has impacted the international market’s grain supply chain, and soybean import risks have become prominent.
Huang Hanquan believes that in the face of the huge uncertainty of the international political and economic situation and the epidemic, China must first promote the diversification of import sources in order to grasp the initiative in international soybean trade. In addition to the traditional big export countries such as Brazil, the United States, and Argentina, increase imports from countries along the “Belt and Road” such as Russia, Ukraine and Africa to ensure a stable supply of soybean imports.
The second is to adopt a more open international mindset, actively safeguard the global soybean trade, increase China’s investment in planting bases and major logistics port facilities in major soybean producing countries, and strengthen the control of the international soybean industrial supply chain.
The third is to use a more open capitalization mindset, make full use of the futures market to avoid market risks, and strive for more voice in the international market.
To improve my country’s ability to control the supply chain of the international soybean industrial chain, the key is to fully support and cultivate China’s own large grain merchants, actively guide enterprises to “go global”, and continuously improve international competitiveness. Today, a number of domestic grain companies represented by COFCO continue to grow and develop, but compared with major international grain merchants, their international competitiveness is still relatively weak. It is understood that the “four major grain merchants” of Adami, Bunge, Cargill and Louis Dreyfus of France control 80% of the global grain trading market share and 90% of the soybean trading volume.