Chinese authorities have already implemented support price programs for wheat, rice, rapeseed, cotton and corn this year, but there has been no announcement of a soybean support price. According to China Grain Net, uncertainty about the support price policy has the Chinese soybean market in a deep freeze. Farmers are hesitant to sell at current market prices if the government later announces a higher support price.
The Chinese government has conducted a "temporary reserve" program to support soybean prices in northeastern provinces each year since 2008. The support price is usually announced in late October or early November, but there have been rumors that the temporary reserve for soybeans would be abandoned in favor of a target price program. In contrast, the support price for corn was announced three months ago but there have been no indications from the government whether the soybean temporary reserve will be implemented this year. According to the Ministry of Agriculture, 87.9 percent of soybeans had been harvested by October 10, but farmers still don't know what the policy will be selling their beans.
According to China Grain Net, farmers anticipate that the temporary reserve support price will be 4.8 yuan per kg, up from 4.6 yuan in 2012. The current market price is reported to be 4.3 to 4.6 yuan--below the expected support price level. The price for soybeans used for food processing--tofu, soy milk, etc--is about 0.4 yuan higher.
According to customs statistics, the average unit value of imported soybeans was US$ 608 in September 2013--equal to about 3.7 yuan per kg, well below the price of domestic Chinese soybeans.
While raising domestic soybean prices encourages farmers to plant them, it raises raw material costs for processors. Thus, if policymakers raise soybean prices too much they will drive processors out of business and have to buy all the soybeans themselves.
According to Chinese customs statistics, imports of soybeans during September 2013 totaled 4.7 mmt, the lowest volume in the last five months. China has imported 45.7 mmt of soybeans in the first nine months of 2013, up 3.3% from the same period in 2012. China is also importing more vegetable oils--5.5 mmt during the first nine months of 2013, up 8.7 percent from last year. Statistics for January-August showed palm oil imports were up 8.7% and rapeseed oil imports were up 67%, while soybean oil imports were down 26.5%.
Vegetable oil processed from Chinese soybeans has become less competitive due to high raw materials costs. Thus, the edible oil market has been mostly ceded to processors of imported oilseeds and imported oils. The China Grain Net article estimates that 60 percent of China's soybeans are used for food products like tofu and soy milk. It says most of Heilongjiang's soybeans are transported to food processing enterprises in southern regions of China.