Soybean Support Price Held Steady

China's National Development and Reform Commission announced that the 2013-14 support price for soybeans in the northeastern provinces would be set at the same level as last year, 4600 yuan per metric ton. The November 15 announcement is a departure from past years' practice of raising the minimum price each year to help farmers cover rising costs.

According to one grain analyst from an official think tank, "With international prices falling, the government did not raise the soybean price this year." Chicago soybean futures prices have fallen 6.8 percent since August.

As it is, Chinese soybean prices are said to be 10 percent higher than "American soybean prices," encouraging more imports.

Chinese authorities had announced increases in minimum prices for wheat, rice, and corn this year. Many had expected an increase in the soybean support price to 4,700-4,800 yuan.

China's soybean production has fallen three years in a row. China's National Grain and Oils Information Center estimates that Chinese soybean production fell 6.5% in 2013 to reach 12 million metric tons. With costs rising and the price steady at best, another decline is likely in 2014.

Holding the line on the soybean support price may also be a symbolic action reflecting the principle of letting markets decide resource allocation that was emphasized in last week's "third plenum" document.

Another analysis suggests that the steady support price might address the "price without a market" phenomenon in which enterprises are unwilling to buy soybeans at the (high) support price. It is estimated that the government has accumulated soybean reserves in the northeast totaling 8-to-9 million metric tons, equal to about two years of production in Heilongjiang Province. Procurement for the reserves has fallen from about 3 million metric tons annually in 2010 and 2011 to just 1 million tons in 2012. The inventory remains high despite the government's efforts to move the reserves to other provinces or auction them off during the summer. Another increase in soybean price would have left farmers unable to sell their soybeans.