Sunday, January 27, 2019

Trade War Prompts Chinese Soybean Subsidies

A trade war "wake-up call" has prompted strong support for soybean production from Chinese officials in 2019, according to one article posted on Chinese feed industry web sites. The Chinese government has recently circulated a document calling for increased soybean production and higher subsidies for soybean farmers.

A second article circulating last week included a scan of a Ministry of Agriculture and Rural Affairs (MARA) "letter of opinion" launching a "soybean revitalization plan" and reported on a meeting of Heilongjiang Province communist party officials discussing the importance of boosting soybean production to give China greater power in trade negotiations. The document is being passed around in the soybean industry but is not public.
January 15 letter of opinion from MARA crop management office 
calling for soybean revitalization program in northeastern provinces in 2019. 
The MARA document reportedly sets goals of increasing area planted in soybeans to 150 million mu (10 million hectares) in 2022. That would represent a 19-percent increase over four years from 126 million mu (8.4 million hectares) planted in 2018. The document calls for a 10-million-mu increase in 2019. Calculations using the 1880-kg/ha average yield in 2018 suggest this expansion of acreage would increase China's soybean output by 3 million metric tons over four years.

The document and the two articles discussing it emphasize the importance of increasing the financial returns to farmers from growing soybeans versus corn. Local officials in northeastern provinces will be urged to set this year's soybean and corn subsidies to make soybeans at least as profitable as corn in order to "fully mobilize" farmers to plant soybeans. Officials are ordered to publicize soybean subsidy information around the Lunar New Year holiday ahead of the spring planting season.

In 2018, the soybean subsidy in Heilongjiang Province--the largest soybean-producing region in China--was already boosted to 320 yuan per mu and the corn subsidy was slashed to 25 yuan per mu.

One of the writers noted that "soybean revitalization" documents have been issued each year with little actual impact. The second writer reported that soybean farmers and traders say 2018-harvested Chinese soybeans have not sold well and prices dropped from 1.85 yuan/500g to 1.7 yuan/500g. "If the sales problem can't be solved, farmers won't take the risk of growing soybeans," the writer warned.

The first writer attributed the government's strong support for soybean production this year to a wake-up from the trade war that drew attention to China's reliance on soybean imports. Although China consumes mainly imported soybeans--the writer says--domestic soybeans cannot be discarded and must continue to be grown even if they lose money.

The second writer also described the MARA "soybean revitalization" letter partly as a strategy to deal with the trade war. He surmised that the series of soybean revival documents have been issued annually to give China a "right to speak" in the soybean market by reducing excessive reliance on imports. He says China's strategies are to diversify suppliers of imported soybeans and to reduce protein inclusion in animal feed. He mentions Argentina, Canada, Russia, Ukraine, and Bolivia as alternative suppliers. He does not mention that China's imports from each of these countries actually fell during 2018, and China does not import any soybeans from Bolivia. (Maybe he meant Uruguay.)

Thursday, January 24, 2019

African Swine Fever Shakes Up China Pork Industry

Chinese officials insist the African swine fever (ASF) is under control, but many say the disease is much more widespread than indicated by the 100-plus officially confirmed cases. The Chinese pork industry has been disrupted by plunging prices during 2018, an ongoing environmental campaign to close polluting farms, and the rapid spread of ASF to 25 provinces in six months. Officials are circling the wagons and denying the problem is out of control, but reports of panic-slaughter and expectations of tight supplies and rising prices later in 2019 occasionally filter through.
  • Echoing a series of statements from Ministry of Agriculture and Rural Affairs officials this month, an Animal Disease Prevention and Control Center researcher insisted that ASF is under control and assured the public that officials follow strict procedures when the virus is discovered, closing down shipments of swine, depopulating and disinfecting farms, and conducting epidemiological investigations.
  • The Disease center researcher blamed the spread of the disease on pork smuggled from foreign countries, travelers bringing pork from infected countries, food waste from international flights, wild pigs crossing the border, consumers' preference for freshly slaughtered pork that leads to long-distance transportation of pigs, poor sanitation among the "huge" number of backyard farmers, contaminated trucks and workers, and use of food waste to feed pigs. He noted that the disease's long incubation period means pigs may be contagious but show no clinical symptoms for 3 weeks.
  • In Hebei Province, a person was detained and fined for disseminating text messages showing photos of dead pigs in a village purportedly hit by ASF in the Tangshan district. The message was widely circulated, generating responses such as, "Is pork safe to eat?" and "ASF has arrived!" Yesterday, officials claimed that their investigations found the pigs had died of some other unidentified disease after the weather turned cold. They said the person's message had "a bad effect."
  • A farmer and pig dealer in Guiyang, Guizhou Province were arrested for conspiring to sell dead pigs to a slaughterhouse where inspectors discovered the pigs had died of ASF.
  • Officials in a district outside Shanghai say they shut down backyard farms that previously held 50,000 pigs after ASF was discovered there during November. Last month a person was arrested for supplying pig farmers with food waste that was suspected as the source of the virus. Officials said the closed backyard farms were somehow replaced with 10 large-scale farms with combined 50,000-head capacity.
  • Officials in Henan say they eliminated 980,000 backyard livestock and poultry farms last year in order to achieve the province's target for utilizing livestock waste set in the 13th five-year plan.
  • A team of futures analysts toured Henan Province to investigate impacts of ASF and found the virus is having serious impact in northern counties of Henan although only two cases have officially been reported (the last one officially reported was in October). The analysts were told that some large-scale farms in that region are panic-slaughtering animals or cutting back production dramatically. Slaughter facilities said large numbers of sows including pregnant animals were delivered for slaughter last year. Another farmer said farms are slaughtering small pigs at 50-80 kg at a discount price to avoid the cost of raising them to customary slaughter weight.
  • The futures analysts heard local people expect Henan's swine production capacity to shrink 30 percent this year and hog prices are expected to go up in the second half of 2019. Farms reportedly faced a "gamble" of maintaining capacity to take advantage of high prices later this year or disposing of animals to avoid the risk of ASF infection. Farmers in southern counties of Henan say their counties are free of the disease and there is no panic-slaughter there.
  • Futures analysts were told that tight credit and unpaid debts are a widespread problem for Henan hog farms. One farmer said family farms with 100-300 sows are better positioned to survive due to their lower needs for working capital compared with big farms. 
  • Farmers in Henan said they are being cautious about purchasing pigs by maintaining their own sows, but another person says his company is pushing the "company plus farmer" model in which farmers raise pigs under the company's ownership. One farmer said he no longer buys corn from northeastern provinces and another uses only his own trucks due to ASF fears.
  • Slaughter companies in Henan say their storage facilities are nearly filled with frozen pork inventory which they anticipate selling later in 2019 when prices rise.
  • One veterinary medicine dealer in Henan told the futures analysts that low-protein diets may reduce animals' resistance, and he worried that the disease could become even more serious.
  • The National Bureau of Statistics reported that the swine inventory at the end of 2018 was 428 million head, down 3 percent from 2017. 
  • The Ministry of Agriculture reported the swine inventory at fixed points where they collect data was down 4.8 percent from a year earlier in December 2018 and the inventory of productive sows was down 8.3 percent.

China Dec 2018 Soy Imports: 77% From Brazil

China relied on Brazil for 77 percent of its December 2018 soybean imports, close to Brazil's 75-percent share for calendar year 2018. China's reduced imports of U.S. soybeans during 2018 slightly exceeded its increased imports of Brazilian beans. No new suppliers filled the gap left by China's shunning of U.S. soybeans during 2018. Overall, China's imports of soybeans fell by 7.5 mmt for the calendar year.

China soybean imports, December 2018
December 2018
y-o-y change
Jan-Dec 2018
y-o-y change
1,000 metric tons
Brazil 4,386 2,444 66,082 15,156
United States 69 -6,120 16,640 -16,212
Canada 808 282 1,792 -257
Argentina 187 -453 1,464 -5,119
Uruguay 185 32 1,199 -1,373
Russia 84 -6 816 309
Kazakhstan 0 -2 17 10
Ethiopia 0 -2 18 3
Ukraine 0 184 1 166
Total 5,719 -3,827 88,029 -7,504

  • Brazil accounted for nearly 4.4 million metric tons of the 5.7 mmt of soybeans China imported during December 2018. 
  • December imports from the U.S. were just 69,000 metric tons--about one Panamax-sized cargo.
  • Canada was the second-leading supplier of China's soybean imports in December, but shipments were only 808,000 mt. 
  • Other suppliers during December were Argentina, Uruguay, and Russia.
  • December is typically the peak month for China's imports of U.S. soybeans. Compared with a year earlier, December 2018 imports of soybeans from Brazil were up 2.4 mmt and imports from the U.S. were down 6.1 mmt. 
  • Total December soybean imports of 5.7 mmt were down -3.8 mmt from a year earlier.
  • Calendar year 2018 totals show that Brazil supplied 75 percent (66 mmt of 88 mmt) of the soybeans China imported during 2018. Brazil's share was 53 percent during 2017. 
  • For the Calendar year, China's increased soybean imports from Brazil (+15.15 mmt) did not quite offset the drop in soybean imports from the U.S. (-16.2 mmt).
  • For 2018, China's imports of U.S. soybeans totaled 16.6 mmt, nearly 50-percent less than the CY2017 total. The 19-percent U.S. share of China's 2018 soybean imports was down from 34 percent in 2017.
  • China's CY2018 soybean purchases from Argentina, Uruguay, and Canada also dropped from a year earlier. 
  • China increased its soybean imports from Russia, Kazakhstan, Ethiopia, and Ukraine during 2018, but only Russia was a significant supplier. Russia supplied China with 816,000 metric tons during CY2018, up 309,000 mt from 2017.

Wednesday, January 23, 2019

Trade War Impact on Ag Imports Peaked in December

China's December 2018 agricultural imports were down 9 percent year-on-year. Impacts of the trade war peaked during the month as the value of agricultural products arriving from the United States plummeted 80 percent year-on-year. Imports of several feedstuffs and industrial raw materials from all trade partners plunged. Robust demand for commodities such as beef, dairy, fruit and nuts contributed to 9-percent growth in the overall value of China's agricultural imports for the entire 2018 calendar year.

December 2018 data from China Customs Administration's monthly bulletin released today indicate China imported about $11.5 billion worth of agricultural and food items during the month (down 9 percent from a year earlier). The calendar year total was $145.2 billion (up 9 percent from a year earlier).

China agricultural imports by value, December 2018

Agricultural products 11,498 -9.0 145,192 9.0
Major categories:
Oilseeds, hay, seeds 2,968 -32.2 53,353 -2.6
Seafood 1,091 31.0 11,600 43.7
Meat and offal 979 -2.3 11,019 16.2
Fruit and nuts 861 41.4 8,683 35.8
Edible oils 813 -1.7 8,609 3.9
Cereal grains 367 -33.9 5,794 -9.5
Dairy 427 15.4 5,601 10.5
Animal hides 315 -29.4 4,779 -15.4
Wool 248 -29.2 4,198 15.6
Cotton 927 14.7 9,890 14.8
Note: "Agricultural" total includes HS 01-24, 41, 51, 52.
Source: China Customs monthly bulletin.

The December decline mainly reflects a plunge in soybean imports due to the trade war with the United States. The value of oilseed imports for the entire year was down by just -2.6 percent as China's increased imports of Brazilian soybeans nearly offset lower imports from the United States. December cereal grain imports were down about one-third from a year earlier, and the calendar-year total was down -9.5 percent. Animal hide imports were also down, both in December and for the year. Calendar-year imports of seafood, fruit and nuts, and dairy were up by double digits.

There were some differences within these broad categories. The volume of beef imports was up 40 percent in December, but pork imports were down 14 percent. Wheat imports were up, but imports of other grains were down sharply. December sorghum imports were minimal and barley imports were down by 75 percent from a year earlier. Imports of other feedstuffs, including fish meal, soybean meal, and cassava, were down sharply from a year earlier. Palm oil imports were up marginally. Big percentage year-on-year increases in imports of soybean oil, peanut oil, and rapeseed oil contributed marginally to the supply of imported edible oils. Imports of olive oil were down sharply.

Cotton imports continued their 2018 rebound in December, but imports of other raw materials used in manufacturing--wool, animal hides, natural rubber--were down sharply from a year earlier. China's imports of fruit, nuts, and dairy products were up in December.

China 2018 imports of major agricultural commodities, 
by volume
December 2018 imports
Year-on-year change
Jan-Dec 2018 imports
Change from 2017

1000 mt
1000 mt
Meat and offal 355 -9.7 4,217 2.9
  Beef 105 40.0 1,039 49.5
  Pork 95 -14.4 1,193 -2.0
  Mutton 28 0.2 319 28.1
  Frozen chicken 44 4.9 502 11.5
Fruit and nuts 480 19.9 5,650 25.2
Dairy products 232 14.8 2,742 7.8
Cereal grains 1,090 -42.5 20,470 -20.0
  Wheat 240 14.0 3,100 -29.9
  Rice 270 -36.0 3,080 -23.6
  Corn 420 -8.2 3,520 24.7
  Barley 140 -75.4 6,820 -23.1
  Sorghum 0 -98.0 365 -27.8
Soybeans 5,720 -40.1 88,030 -7.9
Edible oils 740 22.7 6,290 9.0
  Palm oil 430 2.8 3,570 3.1
  Rapeseed oil 140 133.0 1,300 71.2
  Soybean oil 50 67.0 550 -16.0
  Peanut oil 8 148.2 128 18.6
  Olive oil 5 -38.4 40 -7.0
Sugar 170 25.8 2,800 22.1
Cassava 270 -65.5 4,800 -41.0
Fish meal 50 -12.3 1,460 -7.1
Soybean meal
-94.0 23 -62.7
Cotton 220 118.3 1,570 36.2
Wool 20 -38.9 370 7.0
Hides  48 -20.1 702 -7.0
Natural rubber 290 -22.7 2,600 -7.1
Chemical fertilizer 1,130 42.0 9,500 4.8
Source: China Customs monthly bulletin.

China's December 2018 agricultural imports from the United States totaled just $669 million, down from $3.4 billion a year earlier--an 80-percent year-on-year decline. China's agricultural imports from the U.S. for the entire 2018 calendar year were $16.2 billion, down $8 billion or 33 percent from 2017, based on the preliminary data from customs. Fruit and nuts stand out as the one category where imports from the United States were up from the previous year, both in December and for the entire 2018 calendar year. Imports from the United States in other major categories were down sharply. Grain and oilseed imports from the U.S. were under a de facto embargo in December--down 96 percent from a year earlier. Meat imports from the United States were down 88 percent from the previous December.

December is customarily the peak season for China's imports of U.S. soybeans, so the impact of the trade war on imports from the United States was especially prominent during the month. China's December imports in the oilseed category--dominated by soybeans--totaled just $69 million. That was nearly $2 billion less than the year-earlier total of $2.63 billion in December 2017. For the 2018 calendar year, imports from the United States in the oilseed category totaled $7.68 billion, down by $6.9 billion from the 2017 calendar year total.

China agricultural imports from United States by value, December 2018
December 2018 imports
Year-on-year change
Jan-Dec 2018 imports
Change from 2017

Agricultural products 669 -80.3 16,205 -33.1
Major categories:
Oilseeds, hay, seeds 69 -97.4 7,678 -47.3
Seafood 60 -46.5 1,251 -4.8
Meat and offal 16 -88.1 537 -54.8
Fruit and nuts 172 81.1 808 5.4
Edible oils 9 83.1 106 -23.5
Cereal grains 1 -96.4 909 -39.8
Dairy 17 -52.1 329 -23.2
Animal hides 59 -40.2 886 -26.1
Wool 0 -67.2 19 12.5
Cotton 53 -32.9 1,106 3.1
Source: China Customs monthly bulletin.