Foreigners Eat Up the Soybean Industry

In an April 13 article, The Farmers' Daily lists some recent headlines from China's news media about the soybean industry:
“Foreign Companies Eat Up of Our Country’s Soybean Industry,”
“National Soybean Reserves Full, Oil Enterprises Have No Soybeans”,
“The Last Watcher for The Domestic Soybeans Switches Sides,”
“’Foreign bean’ low price attack, Heilongjiang Soybean Industry Collapse”
The article calls these "...media attacks on the soybean industry’s 'collective anxiety.'"

"Foreign Companies Eat Up Our Country's Soybean Industry," published in The Securities Times in February, reveals some of the bitterness against multinational grain-trading companies and the maneuvering to push policies to support the domestic edible oils industry.

The Security Times article begins by blaming the idling of 60% of domestic soybean crushers, ups and downs in price of certain cooking oil brands, and "a lot of strange happenings" on foreign companies "...that control the fate of the entier soybean industry chain."

The reporter learned that the China Soybean Association passed on research materials and recommendations to the government to change the industry's high degree of reliance on foreign companies. The association apparently is the instigator of the soybean industry plan to raise self-sufficiency to 60% that was turned into the State Council at the end of March.

The reporter explains, "...in the last few years our country’s soybean industry faced pressure from low-priced imported soybeans. During last year’s financial crisis, nearly 70% of soybean enterprises in Heilongjiang shut down." An engineer from a Heilongjiang crushing plant reports that his company loses money on every ton of soybeans they process, so they shut down.

An official from the Heilongjiang soybean association said the soybean industry’s problems are all related to four companies: ADM, Bunge, Cargill, and Louis Dreyfus.

He explains: "During the 2004 soybean crisis [when soybean prices suddenly fell and many Chinese companies were caught with contracts to buy soybeans at high prices], domestic crushers faced serious losses, many companies collapsed, and the four foreign companies...bought up over 70% of the shut-down companies. Since then our country’s soybean industry chain was fractured by foreign investment and became subject to them."

The Heilongjiang official thinks government and enterprises need to "...work together to create a set of strong domestic companies, setting up a completely independent industry chain. This way...industry can be promoted to withstand external shocks.”

The vice chairman of the China soybean industry association said they kept their report secret (an internal document) "...since foreign companies have deeply penetrated." The report calls for strengthening the Chinese soybean companies, reducing dependence on foreign companies, establishing an independent price-setting system, forming independent brands.

The Farmers Daily reports on a speech by Cheng Guoqiang (economist at the State Council's Development Research Center) given at an international soybean market conference in Beijing on April 11-12 where he acknowledged the complexity of the soybean industry issue.

Cheng notes, "Public opinion at present is colored by the interests of certain regions and companies."

Cheng explains that limited resources prevent China from supplying enough soybeans to meet its growing demand. In 2008-09, the government supported soybean prices to help farmers, but this raised costs for crushing enterprises, leading to losses and idled capacity. A rising proportion of Chinese soybeans are used for food processing (tofu, soy milk, etc), not oil-processing.

He describes it as "...an intense game between different interest groups."

He adds, "The protection of farmers’ interests needs to be stressed more.”