In recent weeks, Chinese buyers have been grabbing lots of soybeans in the U.S. market despite the financial crisis. This surge in demand for imports is ironic, given that China had a big soybean harvest. The explanation is that Chinese soybeans are not being sold because the government has supported the price. Imports are flooding in to replace domestic beans.
As reported earlier here, Heilongjiang Province's soybean industry is in crisis. The government sought to support prices at 3.7 yuan/kg. when domestic prices began to follow the downward plunge in global prices this fall. However, China has minimal barriers to soybean imports (the tariff is 3%) and imported soybeans are available at Chinese ports at 3.1 yuan/kg. With such a big price differential, processors don't want to buy domestic beans.
An article posted on the China edible oils net (and on many other Chinese news sites) on Jan. 8, plays up the crisis situation with a nationalistic slant. The article attributes the drop in soybean prices to the American financial crisis, "a cold wind blowing from across the ocean." The price support measure restored market confidence and supported domestic prices and farmers’ profits, "but game strategies adopted by multinational traders brought about another crisis in our province’s soybean industry."
Heilongjiang farmers attracted by high prices early this year, increase production to 7 mmt according to some government statistics, and private associations think it could have reached 8 mmt. Farmers still had some soybeans on hand from the previous year, so there was a huge supply in the region. In December and later, farmers still had 5 mmt of soybeans left to sell. Temporary purchases by the state for reserves totaled only 2 mmt, far less than what farmers needed to sell. With shrinking demand and a surge in supply, downward pressure on prices increased, and the government supported prices.
According to the article, "Since the beginning of 2004, some multinational consortia utilized capital to merge coastal oil processing enterprises that mainly process imported soybeans, providing competition for domestic crushers."
Heilongjiang processors, considering the low-price of "dumped" imported beans, cannot afford to process domestic beans at the state-reserve price. Imported soybeans and domestic beans have a cost difference of 600 yuan/mt. Provincial processors will surely make losses, so they have stopped production. "We’re caught between the high state reserve price and competition from low imported beans, and low-priced products from southern coastal processors [processing imported beans]."
Although the international and domestic soybean markets are weak, at present some multinational grain traders are still importing [a lot of] soybeans. They don't pay the state reserve support price, and moreover they have taken the opportunity to sell their low-priced genetically modified soybeans in our province.
One company representative told the reporter, in general, multinational grain companies buy about 2 mmt of soybeans from Heilongjiang annually. But this year they have not only stopped buying here, they have tightly controlled the port price of imported beans, adding to the pressure on soybeans marketed in our province. At the same time, some of the processors controlled by these multinational grain companies have been selling more soymeal and oil to Heilongjiang. According to estimates, the 600 yuan cost difference between domestic and imported beans is still big even after deducting the 160 yuan transportation cost to Heilongjaing. Feed mills in Heilongjiang have already been buying soymeal from coastal crushers.
This also hurts Heilonjiang’s competitive advantage as a non-GMO province. A lot of GMO soybeans have entered our province, contaminating our soybeans, threatening our ability to stay GMO-free. According to other reports some rogues have been trying to sell imported GMO soybeans in Heilongjiang at the support price. As a result, the imported beans are mixed with domestic non-GMO beans, so Heilongjiang crushers can't claim their oil is non-GMO.
The subtle references reveal lingering suspicions that multinational companies are trying to destroy the Heilongjiang industry. These suspicions came to the fore during an earlier crisis in 2004 when global prices crashed and many Chinese companies were stuck with contracts for high-priced beans.
As reported earlier here, Heilongjiang Province's soybean industry is in crisis. The government sought to support prices at 3.7 yuan/kg. when domestic prices began to follow the downward plunge in global prices this fall. However, China has minimal barriers to soybean imports (the tariff is 3%) and imported soybeans are available at Chinese ports at 3.1 yuan/kg. With such a big price differential, processors don't want to buy domestic beans.
An article posted on the China edible oils net (and on many other Chinese news sites) on Jan. 8, plays up the crisis situation with a nationalistic slant. The article attributes the drop in soybean prices to the American financial crisis, "a cold wind blowing from across the ocean." The price support measure restored market confidence and supported domestic prices and farmers’ profits, "but game strategies adopted by multinational traders brought about another crisis in our province’s soybean industry."
Heilongjiang farmers attracted by high prices early this year, increase production to 7 mmt according to some government statistics, and private associations think it could have reached 8 mmt. Farmers still had some soybeans on hand from the previous year, so there was a huge supply in the region. In December and later, farmers still had 5 mmt of soybeans left to sell. Temporary purchases by the state for reserves totaled only 2 mmt, far less than what farmers needed to sell. With shrinking demand and a surge in supply, downward pressure on prices increased, and the government supported prices.
According to the article, "Since the beginning of 2004, some multinational consortia utilized capital to merge coastal oil processing enterprises that mainly process imported soybeans, providing competition for domestic crushers."
Heilongjiang processors, considering the low-price of "dumped" imported beans, cannot afford to process domestic beans at the state-reserve price. Imported soybeans and domestic beans have a cost difference of 600 yuan/mt. Provincial processors will surely make losses, so they have stopped production. "We’re caught between the high state reserve price and competition from low imported beans, and low-priced products from southern coastal processors [processing imported beans]."
Although the international and domestic soybean markets are weak, at present some multinational grain traders are still importing [a lot of] soybeans. They don't pay the state reserve support price, and moreover they have taken the opportunity to sell their low-priced genetically modified soybeans in our province.
One company representative told the reporter, in general, multinational grain companies buy about 2 mmt of soybeans from Heilongjiang annually. But this year they have not only stopped buying here, they have tightly controlled the port price of imported beans, adding to the pressure on soybeans marketed in our province. At the same time, some of the processors controlled by these multinational grain companies have been selling more soymeal and oil to Heilongjiang. According to estimates, the 600 yuan cost difference between domestic and imported beans is still big even after deducting the 160 yuan transportation cost to Heilongjaing. Feed mills in Heilongjiang have already been buying soymeal from coastal crushers.
This also hurts Heilonjiang’s competitive advantage as a non-GMO province. A lot of GMO soybeans have entered our province, contaminating our soybeans, threatening our ability to stay GMO-free. According to other reports some rogues have been trying to sell imported GMO soybeans in Heilongjiang at the support price. As a result, the imported beans are mixed with domestic non-GMO beans, so Heilongjiang crushers can't claim their oil is non-GMO.
The subtle references reveal lingering suspicions that multinational companies are trying to destroy the Heilongjiang industry. These suspicions came to the fore during an earlier crisis in 2004 when global prices crashed and many Chinese companies were stuck with contracts for high-priced beans.
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