Soybean crushers anticipated making it through the next few months without U.S. soybeans in an October 14 article published in the communist party's Futures Daily, but they also expressed trepidation about tight soybean supplies.
A futures analyst investigated the demand for soybean meal, the effect of trade tensions on soybean supplies and the impact of African swine fever on feed demand in the region by visiting 5 soybean crushing plants, three feed mills and a large integrated livestock company in Liaoning Province. This is a relatively small slice of China's soybean market compared to much larger crushers and feed mills in Shandong, Jiangsu and other coastal provinces further south.
The 25-percent tariff on U.S. soybeans appears to have morphed into a boycott. All of the companies interviewed presumed there would be no imports of U.S. soybeans in the fourth quarter of 2018. There was no consideration that they might buy if the price is right--even though U.S. soybeans with the 25% tariff are cheaper than Brazilian or Chinese soybeans at present. Even a foreign-owned crusher said their company would/could not import U.S. soybeans. Other Chinese news media include similar assumptions of zero imports of U.S. soybeans. Chinese media was quick to counter news from "foreign media" that two cargoes of U.S. soybeans were headed for China by trotting out buyers who insisted the shipments had been purchased in March and April--before trade tensions began in earnest--and they had not purchased any U.S. soybeans since then.
Crushers interviewed by the futures analyst said they have stocked up on Brazilian soybeans and they think they have enough to continue operations through December or January without importing U.S. soybeans. They appear confident they can make it through the next three months, but they anticipate soybean supplies will be "tight." In this article and others, everyone says they expect a soybean deficit of "10 million tons or so." The strategy of stocking up on extra Brazilian soybeans may be difficult to sustain in a drawn-out trade war of more than a year. Stocks will be scraping bottom by the time new soybeans are available from Brazil.
Most of their soybeans are stored in large warehouses at the Dalian and Yingkou ports in Liaoning Province. One crusher transports soybeans by rail from Dalian on a daily basis. Crushers store smaller amounts of soybean meal and oil which they sell mainly in the surrounding region of Liaoning and adjoining provinces.
Crushers sell directly to feed mills, both in bags and in bulk. According to one feed mill, over 90% of commercial feed in this region is produced for chickens and aquaculture and relatively little for hogs. However, a branch of one large integrated feed-livestock company said it produces 300,000 metric tons of feed for swine. Because corn is widely available in the northeastern region, one feed mill said most swine feed is concentrate (mainly soy meal, vitamins and trace elements) and premixes that are mixed with local corn. However, a large feed company says about two-thirds of its production is complete formulated feed for swine. Feed mills agreed that demand for poultry, aquaculture, beef cattle, and sheep is more vigorous than pork demand this year. One said pig feed sales are down this year.
Northeastern China is experiencing expansion of swine production and feed in response to the government's policy of "raising pigs in the north for the south" which has encouraged a shift of swine production from environmentally-stressed areas of the south to the Northeast region. The analysts were told that the expansion is ongoing and only a minor part of the planned new capacity has come online already. There has also been an expansion of crushing capacity--several crushing plants said they had built new production lines with capacity of 2,500-to-3000 metric tons per day. Companies said they expected expansion of soybean meal production to eventually saturate the market (not considering the effects of this year's trade tensions), and shipments of soybean meal from Shandong and other regions to the Northeast would shrink or vanish.
The poultry integrator said they vary the proportion of soybean meal in feed between 15% and 25%, depending on relatively prices of ingredients. The proportion is now at the bottom of the range. The large feed company branch said they use 15%-16% soybean meal in swine feed and may adjust it slightly as the meal price rises. One manager said mills had reduced soy meal use by 3%-to-4% in response to the government's call to cut back on soy meal. Another feed mill said there is some flexibility to adjust soymeal proportion in feed for laying hens but they are trying to keep the proportion stable in pig feed. The northeast region has access to relatively few substitutes for soybean meal. One mill buys some rapeseed from Inner Mongolia and another said they can use small amounts of peanut meal, but no palm kernel meal. Two feed mills said feed price increases are likely as raw material prices rise.
The companies seemed relatively unconcerned about impacts of African swine fever. They said the government's 1,200 yuan-per-head subsidy for culled pigs was enough to encourage farmers to comply with mandated culling in the 3-kilometer radius around outbreaks of the disease. They said the number of pigs culled is a tiny proportion of national production, but they agreed that African swine fever is inducing farmers to scale back plans to expand herds. One large company has put on hold plans to open a large pig breeding farm.
A futures analyst investigated the demand for soybean meal, the effect of trade tensions on soybean supplies and the impact of African swine fever on feed demand in the region by visiting 5 soybean crushing plants, three feed mills and a large integrated livestock company in Liaoning Province. This is a relatively small slice of China's soybean market compared to much larger crushers and feed mills in Shandong, Jiangsu and other coastal provinces further south.
The 25-percent tariff on U.S. soybeans appears to have morphed into a boycott. All of the companies interviewed presumed there would be no imports of U.S. soybeans in the fourth quarter of 2018. There was no consideration that they might buy if the price is right--even though U.S. soybeans with the 25% tariff are cheaper than Brazilian or Chinese soybeans at present. Even a foreign-owned crusher said their company would/could not import U.S. soybeans. Other Chinese news media include similar assumptions of zero imports of U.S. soybeans. Chinese media was quick to counter news from "foreign media" that two cargoes of U.S. soybeans were headed for China by trotting out buyers who insisted the shipments had been purchased in March and April--before trade tensions began in earnest--and they had not purchased any U.S. soybeans since then.
Crushers interviewed by the futures analyst said they have stocked up on Brazilian soybeans and they think they have enough to continue operations through December or January without importing U.S. soybeans. They appear confident they can make it through the next three months, but they anticipate soybean supplies will be "tight." In this article and others, everyone says they expect a soybean deficit of "10 million tons or so." The strategy of stocking up on extra Brazilian soybeans may be difficult to sustain in a drawn-out trade war of more than a year. Stocks will be scraping bottom by the time new soybeans are available from Brazil.
Most of their soybeans are stored in large warehouses at the Dalian and Yingkou ports in Liaoning Province. One crusher transports soybeans by rail from Dalian on a daily basis. Crushers store smaller amounts of soybean meal and oil which they sell mainly in the surrounding region of Liaoning and adjoining provinces.
Crushers sell directly to feed mills, both in bags and in bulk. According to one feed mill, over 90% of commercial feed in this region is produced for chickens and aquaculture and relatively little for hogs. However, a branch of one large integrated feed-livestock company said it produces 300,000 metric tons of feed for swine. Because corn is widely available in the northeastern region, one feed mill said most swine feed is concentrate (mainly soy meal, vitamins and trace elements) and premixes that are mixed with local corn. However, a large feed company says about two-thirds of its production is complete formulated feed for swine. Feed mills agreed that demand for poultry, aquaculture, beef cattle, and sheep is more vigorous than pork demand this year. One said pig feed sales are down this year.
Northeastern China is experiencing expansion of swine production and feed in response to the government's policy of "raising pigs in the north for the south" which has encouraged a shift of swine production from environmentally-stressed areas of the south to the Northeast region. The analysts were told that the expansion is ongoing and only a minor part of the planned new capacity has come online already. There has also been an expansion of crushing capacity--several crushing plants said they had built new production lines with capacity of 2,500-to-3000 metric tons per day. Companies said they expected expansion of soybean meal production to eventually saturate the market (not considering the effects of this year's trade tensions), and shipments of soybean meal from Shandong and other regions to the Northeast would shrink or vanish.
The poultry integrator said they vary the proportion of soybean meal in feed between 15% and 25%, depending on relatively prices of ingredients. The proportion is now at the bottom of the range. The large feed company branch said they use 15%-16% soybean meal in swine feed and may adjust it slightly as the meal price rises. One manager said mills had reduced soy meal use by 3%-to-4% in response to the government's call to cut back on soy meal. Another feed mill said there is some flexibility to adjust soymeal proportion in feed for laying hens but they are trying to keep the proportion stable in pig feed. The northeast region has access to relatively few substitutes for soybean meal. One mill buys some rapeseed from Inner Mongolia and another said they can use small amounts of peanut meal, but no palm kernel meal. Two feed mills said feed price increases are likely as raw material prices rise.
The companies seemed relatively unconcerned about impacts of African swine fever. They said the government's 1,200 yuan-per-head subsidy for culled pigs was enough to encourage farmers to comply with mandated culling in the 3-kilometer radius around outbreaks of the disease. They said the number of pigs culled is a tiny proportion of national production, but they agreed that African swine fever is inducing farmers to scale back plans to expand herds. One large company has put on hold plans to open a large pig breeding farm.
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