There is consensus among analysts that China's soybean production is down substantially this year. The Jilin Province Commerce Department estimates that production is down 30% this year, to 12 million metric tons (mmt). Another estimate from a crop tour organized by a futures exchange group observes that soybean planted area is down 25%-30% in Heilongjiang, but estimates this year's national crop at 14 mmt, down 8%-9%.
An article in the Huaxia Times reports varying estimates of the decline in soybean production. One soybean analyst estimates a 17% decline, but the article adds a caveat: "compared with some other estimates this seems optimistic." The same analyst estimates that production in Heilongjiang Province could be down 26%. Another futures analyst says he found on a crop tour of the northeast that soybean area has been declining since 2008 and is down one-third to one-half in many areas.
The Huaxia Times report uses military rhetoric to sound an alarmist tone on the decline in soybean production. Juxtaposing the soybean analyst's 15.5 mmt estimate of this year's soybean crop against this year's soybean imports of over 50 mmt, the Huaxia article describes the soybean industry as having "fallen to enemy occupation."
The Huaxia article correctly attributes the decline in Chinese soybeans to low profits: rice nets returns double those from soybean-planting and corn profits are also much higher than those from soybeans. The article cites a large grain farmer who said he replaced most of his soybeans with rice and corn. The futures analyst wrote in her crop tour report that she saw few soybeans in the countryside in eastern Heilongjiang, as most fields were planted in corn. Soybeans were planted only on a few hills.
However, the Huaxia article sprinkles in key phrases like "pressure," "imported soybeans," and "genetically-modified" to give the story a more sinister tone and conjure up a foreign bogeyman. According to Huaxia, since foreign companies came into the Chinese soybean industry in 2004, Chinese soybeans "have been in retreat" because they can't compete with low-cost imported soybeans with higher oil content.
2004 is a watershed year in Chinese soybean industry lore. That year, Chinese soybean companies were caught with uncovered positions during an unexpected decline in world soybean prices. A number of Chinese soybean companies went bankrupt. Many in China believe this was an evil plot by multinational companies to take over the Chinese soybean industry.
Now the Huaxia article follows the conspiracy story trail. The article observes that few companies outside of Heilongjiang use Chinese "non-GMO" soybeans in their vegetable oil crushing plants. A quote from a manager of a Heilongjiang company reveals why this may be the case: he says his company loses money selling cooking oil made from non-GMO Chinese soybeans; profits from other products cover the losses.
Next, the article blames "some local governments" for encouraging farmers to plant other "high-yielding grains like corn and rice." It says, "Soybeans have been abandoned."
Finally, the article interviews several oils industry analysts and managers who offer opinions on how China can protect soybeans by giving subsidies or artificially raising the price.
The article ends with another swipe at the foreign company bogeyman. The last quote is from a manager of Jiusan, one of the biggest Chinese vegetable oil processors, who worries about the effects of soybean interventions on downstream processors. He worries that giving "the same subsidies" to domestic and foreign processors doesn't help the Chinese companies compete with big international grain trading companies.
Scary costume idea for your Chinese Halloween party this week: dress up as a multinational grain trading company.
An article in the Huaxia Times reports varying estimates of the decline in soybean production. One soybean analyst estimates a 17% decline, but the article adds a caveat: "compared with some other estimates this seems optimistic." The same analyst estimates that production in Heilongjiang Province could be down 26%. Another futures analyst says he found on a crop tour of the northeast that soybean area has been declining since 2008 and is down one-third to one-half in many areas.
The Huaxia Times report uses military rhetoric to sound an alarmist tone on the decline in soybean production. Juxtaposing the soybean analyst's 15.5 mmt estimate of this year's soybean crop against this year's soybean imports of over 50 mmt, the Huaxia article describes the soybean industry as having "fallen to enemy occupation."
The Huaxia article correctly attributes the decline in Chinese soybeans to low profits: rice nets returns double those from soybean-planting and corn profits are also much higher than those from soybeans. The article cites a large grain farmer who said he replaced most of his soybeans with rice and corn. The futures analyst wrote in her crop tour report that she saw few soybeans in the countryside in eastern Heilongjiang, as most fields were planted in corn. Soybeans were planted only on a few hills.
However, the Huaxia article sprinkles in key phrases like "pressure," "imported soybeans," and "genetically-modified" to give the story a more sinister tone and conjure up a foreign bogeyman. According to Huaxia, since foreign companies came into the Chinese soybean industry in 2004, Chinese soybeans "have been in retreat" because they can't compete with low-cost imported soybeans with higher oil content.
2004 is a watershed year in Chinese soybean industry lore. That year, Chinese soybean companies were caught with uncovered positions during an unexpected decline in world soybean prices. A number of Chinese soybean companies went bankrupt. Many in China believe this was an evil plot by multinational companies to take over the Chinese soybean industry.
Now the Huaxia article follows the conspiracy story trail. The article observes that few companies outside of Heilongjiang use Chinese "non-GMO" soybeans in their vegetable oil crushing plants. A quote from a manager of a Heilongjiang company reveals why this may be the case: he says his company loses money selling cooking oil made from non-GMO Chinese soybeans; profits from other products cover the losses.
Next, the article blames "some local governments" for encouraging farmers to plant other "high-yielding grains like corn and rice." It says, "Soybeans have been abandoned."
Finally, the article interviews several oils industry analysts and managers who offer opinions on how China can protect soybeans by giving subsidies or artificially raising the price.
The article ends with another swipe at the foreign company bogeyman. The last quote is from a manager of Jiusan, one of the biggest Chinese vegetable oil processors, who worries about the effects of soybean interventions on downstream processors. He worries that giving "the same subsidies" to domestic and foreign processors doesn't help the Chinese companies compete with big international grain trading companies.
Scary costume idea for your Chinese Halloween party this week: dress up as a multinational grain trading company.
Comments