China Drives Global Soybean DemandBy John Baize
A lot has been said about the impact China has had on the global economy since it opened up to foreign investment and capitalism in the early 1990s. However, until one looks at the numbers, it is virtually impossible to gain a true grasp of how much it has impacted our world. In particular, China has been by far the most important factor impacting global demand for soybeans.
Today China is a global economic powerhouse with of population of over 1.3 billion. That’s about one-fifth of the world’s population in a country with 40 percent less arable land per capita than the global average. Moreover, its arable land is shrinking fast as China builds more factories, houses, highways and other infrastructure. All the while the Chinese want, and can increasingly afford, better diets with more animal protein. The U.S. Department of Agriculture (USDA) forecasts China will produce 48.5 million metric tons (mmt) of pork in 2009. That’s 48.4 percent of global pork production. China also produces about 35 percent of the world’s eggs and is the world’s second-largest broiler meat producer after the United States. China also leads the world in farm-raised-fish production, producing 10 times that of India, the second-largest aquaculture producer.
All of that demand for animal protein in China has created a huge demand for soybean meal. Soybeans are believed to have originated in China, and China is the world’s fourth-largest producer of soybeans. However, China’s demand for soybean meal for feed and soybean oil for food surpassed its domestic production beginning in the 1990s. The last time China was self-sufficient in soybeans was in the 1994/95 marketing year. However, only 15 years later China has evolved into by far the world’s largest importer of soybeans as well as the world’s largest importer of soybean oil. The USDA forecasts China will import 1.48 billion bushels of soybeans and 5.3 billion pounds of soybean oil in the 2009/10 marketing year. That equals about 52 percent of all of the soybeans expected to be imported by all nations during the marketing year.
U.S. soybean farmers saw the potential demand for soybeans in China long ago. U.S. soybean farmers, largely through checkoff dollars, joined with the USDA’s Foreign Agricultural Service in 1982 to open an office in Beijing to promote demand for U.S. soybeans. The office works to educate the Chinese how to use soybean meal to better feed pigs, chickens, fish and other animals. Partly because of the promotional efforts, China is today the largest market for U.S. soybeans by a wide margin. In the 2008/09 marketing year, U.S. soybean exports to China exceeded 683 million bushels, or over 53 percent of total U.S. exports of unprocessed soybeans. That means that almost one row in four of the soybeans grown in the United States in 2008 wound up in China. The exports of soybeans to China were worth a record $7.15 billion.
In spite of the success the U.S. has had in developing and supplying the Chinese soybean market, the soybean checkoff continues to fund an aggressive effort in China to build the market even larger. Staff and consultants of the U.S. Soybean Export Council (USSEC), the USB international marketing contractor, continue to work to increase soybean demand in China. I am writing this from Shanghai, China participating in USSEC’s annual trip to China to educate buyers about the quality of the 2009 crop. By analyzing data from soybean samples submitted by U.S. farmers, USSEC can tell buyers the protein and oil content of U.S. soybeans all across the country. It is partly because of such technical assistance and trade servicing funded by checkoff dollars that China’s importers buy so many U.S. soybeans.
There is no reason to believe China’s seemingly insatiable demand for soybeans will not continue in the future. The Chinese economy already has largely recovered from the global recession mostly as a result of greater domestic demand. Hundreds of millions of mostly rural Chinese have yet to benefit much from China’s surging economy, but they undoubtedly will in the future. This will cause demand for animal protein to continue to increase. Because of competing demand for its farmland, China will not be able to increase its soybean production appreciably. For that reason, China will have to increase its imports of soybeans to meet its domestic demand for soybean meal and soybean oil. This should help assure U.S. farmers of a market for their soybeans in the future.
posted by Expert 8:47 am