Forecasting as Propaganda: China's Falling Soybean imports

China will import fewer soybeans and less corn in the next ten years, according to projections issued by China's Ministry of Agriculture and Rural Affairs (MARA) at its annual agricultural outlook conference held April 20. An examination of the track record of these projections indicates that they are a vision of what Chinese leaders would like the future to be, not an objective forecast of what will happen.

MARA expects the country's soybean imports to decline from 96.1 million metric tons (mmt) in 2021 to 85.84 mmt in 2031. This is the first time MARA has projected a decline in soybean imports since Ministry first began issuing future projections in 2014. 

Although these projections are issued by a so-called "early warning committee," they have never proven to be accurate. The projections seem to reflect what Chinese leaders would like the future to look like. In particular, the projections are evidently massaged to minimize imports. 

Each year from 2015 to 2021 MARA released projections predicting a tiny 10-year increase in soybean imports, and each year actual imports exceeded the projection. Then the projections were ratcheted upward the following year when it became apparent that actual imports grew faster than MARA had predicted. For example, back in 2015 MARA projected that soybean imports would rise to 80.8 mmt in 2020, but imports actually reached 100.3 mmt that year, nearly 20 mmt more than had been projected five years earlier. MARA's projected stream of imports looked like a series of parallel lines--until this year's projection.

China Ministry of Agriculture projections issued at various "agricultural outlook conferences."

At last week's outlook conference, MARA revealed its new assessment that soybean imports are on a long-term declining trend. MARA estimated that China's soybean imports will fall from 96.5 mmt to 95 mmt between 2001 and 2022, then continue declining to reach 85.8 mmt in 2031. This time MARA has ratcheted its projection of soybean consumption downward, and it predicts that use of soybeans by the crushing industry will increase by only 4 mmt between now and 2031. MARA also assumes domestic soybean output will more than double from last year's 16.4 mmt to 35.1 mmt in 2031, boosted by soybean subsidies, high prices, and a corn-soybean intercropping strategy. MARA also projected a substantial boost in China's exports of soybeans.

MARA's "early warning" committee did not warn anyone about the spike in China's corn imports during the last two years. MARA issued projections in April 2020 that predicted a small decrease in corn imports to 4.25 mmt that year, but corn imports soared to 11.3 mmt in 2020--a matter of months after the projections were issued (the projections appear to be based on calendar years). At last year's conference MARA projected an increase in corn imports to 20 mmt in 2021, but actual 2021 corn imports were 28.3 mmt. 

Consistent with past form, MARA's latest projections predict that corn imports will plummet in coming years. Interestingly, corn imports will remain above the 7.2-mmt tariff rate quota until 2027. In view of MARA's history of low-balling corn import forecasts, this projection suggests that China is really short of corn. 

Projections made by China Ministry of Agriculture and Rural Affairs.

This year's soybean and corn projections reflect a strong political push to reduce China's reliance on imported soybeans and corn. The campaign began in 2018 with new standards for reducing corn and soybean meal in animal feed issued as a strategy for coping with reducing supplies during the trade war with the United States. In 2021, MARA issued a more detailed document detailing alternatives to corn and soybean meal was issued, and feed companies were goaded to research new feed formulations. A deluge of documents, meetings, and news articles shows that there is strong political momentum behind the soybean campaign, in particular. This month, MARA's National Animal Husbandry Station and associations for feed, livestock, and dairy industries sent out a letter asking them to submit examples of promising substitutes for soybean meal.  

Use of corn in animal feed fell from 52% in 2017 to 39% in 2021, according to an article in Economic Daily last year. The article said soybean meal use fell from 17.9% to 15.6%. China's feed industry association has begun including the percentage of corn and soybean meal in animal feed in its monthly reports. The latest report in March 2022 said corn was 36.1% of complete formulated feed and soybean meal comprised 13.1% of formulated feed and concentrate feed combined.

According to the presentation at the outlook conference, soybean prices were up 32 percent year-on-year due to factors in Brazil, Indonesia and Ukraine, discouraging consumption. The wheat presentation said a release of wheat reserves for use in animal feed and the use of "some wheat imports" for feed was motivated by high corn prices and also reduced need for soybean meal (that need was diminished by the higher protein content of wheat vs. corn.). The MARA's wheat analyst said feed use of wheat will decline 34 percent in 2022 and keep declining in the future. 

MARA also tends to underestimate pork imports. Back in 2015, MARA expected pork imports to increase gradually to 1 mmt by 2024. Pork imports hit 2.4 mmt a year later, in 2016. In 2018-19, China had a massive outbreak of African swine fever that cratered pork supplies. As pigs were dying en masse in 2019, MARA projected that pork imports could go up to 2 mmt in 2020, but imports actually shot up to 4.39 mmt. This year, MARA projects a sharp decline in 2022 pork imports--a plausible outcome in view of the decline in pork prices this year. However, MARA is projecting that pork imports will remain elevated at about 2.5 mmt annually--much higher than they have projected in past years--until 2025 when they gradually decline. 

Projections made by China Ministry of Agriculture and Rural Affairs.

MARA has become more pessimistic about pork consumption over the years. Back in 2015, MARA expected pork consumption to rise at a robust pace of about 1 mmt annually, reaching 66.5 mmt in 2024. Actual consumption never reached that level, and MARA has been dialing back its projections. This year's projection of pork consumption is essentially flat, at about 57 mmt, close to the consumption level back in 2015. 

Projections made by China Ministry of Agriculture and Rural Affairs.

The outlook conference presentations indicated booming consumption of non-traditional animal proteins. While per-capita poultry consumption is projected to rise a modest 1 kilogram over 10 years, MARA noted that consumption of chicken is increasing while duck is decreasing and goose is steady. Chicken already accounts for two-thirds of China's poultry consumption, and "white feather" chickens are outpacing consumption of traditional "yellow feather" native breeds, the poultry presentation said. Chicken feet account for nearly half of poultry imports. MARA thinks the decline in pork prices since last year will discourage poultry consumption in 2022.

MARA's projections are always presented with complex equations, tables and charts that appear to be highly sophisticated mechanistic forecasts, but they do not appear to be much of an improvement over what could be accomplished by using a ruler and a pencil to extrapolate past trends. The projections are supposed to provide "early warnings" of food supply and demand problems, but they never show any alarming phenomena. To the contrary, the projections appear to be massaged to tell the public there is no reason to worry about the food supply. The headlines in communist party media about this year's projections emphasized that China's self-sufficiency is going to improve and the food supply is stable and reliable. 

A presentation of the Chinese "early warning" projection model
is decorated with mathematical equations, charts and tables.

Import Wheat from a War Zone...to reduce risk

China can reduce its food import risk by importing low-quality wheat from the Black Sea war zone because importing from Canada is too risky. This is the latest idea peddled by China's "food security" propagandists struggling to tout a Xi-Putin wheat trade deal while simultaneously assuring the public that the country doesn't really need to import wheat. 

Yicai, a communist party-controlled business news outlet, observed last month that 80 percent of China's record-high wheat imports in 2021 came from the United States, Canada, and Australia, while less than 1 percent came from Russia. The propaganda directives were apparently to allay concerns about wheat supplies in view of bad news about this year's wheat crop announced by the agriculture minister AND to give a boost to the February 3 wheat trade announcement by new best friends Xi Jinping and Vladimir Putin.

Yicai noted that the "record-high" 9.77 million metric tons of wheat imported in 2021 was just 7.1 percent of the amount China produced (fact check: this was not a record--China imported 10-to-15 million tons of wheat nine years during the 1980s and '90s). Yicai recited additional talking points: China's production, reserves and supply are plentiful and the country only needs to import 3-to-4 million tons of wheat annually to fill gaps in classes of high-quality wheat. 

An agriculture ministry expert quoted by Yicai insisted that China is reducing its need for imported wheat as a "supply side structural reform" program expands domestic supplies of wheat with strong and weak gluten. The expert offered no explanation for the surge in imports during 2020 and 2021. An April 7 Xinhua article intended to dispel concerns about wheat supplies quoted Senior National Grain and Oils Information Center grain market analyst Wang Xiaohui who claimed that annual consumption of wheat as food is stable at about 90 million tons while feed use fluctuates between 7 and 35 million tons. He had no explanation for why China increased its wheat imports so much in a year of record-high domestic wheat output. 

Yicai's main concern is the risk posed by relying on five countries for 90 percent of China's wheat imports: Canada, Australia, the United States, France, and Kazakhstan. A study by China Agriculture University deemed this mix of suppliers to be "unreasonable" and undiversified. While Canada has low wheat prices and high quality, the professors said, importing Canadian wheat poses "a high risk"...because "Canada's affairs are greatly influenced by the United States." (The article never mentions ZTE executive Meng Wanzhou's detention, AUKUS or any other specific risk; fact check: Canada's share of wheat imports only reached 50 percent during 2018-19.)

China customs data; calendar years.

Yicai did not offer an explanation for the 30-percent surge in Chinese wheat prices over the past year. Nor did Wang Xiaohui--quoted in the Xinhua article--explain why Chinese wheat prices began rising after last year's record harvest. Wang described the increase in wheat prices as a good opportunity to dispose of aging wheat stocks without affecting national food security.

Yicai then jumped to the conclusion that China should import more wheat from Russia and Ukraine, describing Russia's emergence as the world's top exporter in 2017 as "shocking the 'old order.'" The China Agricultural University professors told Yicai that wheat exports from the Black Sea region could grow a lot over the next 10 years, and suggested the region could replace China's traditional wheat suppliers to a certain degree.

However, Yicai acknowledged that the quality of Russian wheat does not line up with China's needs for high-quality wheat. In fact, China's customs data says China imported only 55,000 metric tons of wheat from Russia--only 0.5 percent of last year's total. Ukrainian data shows a paltry 245 tons of wheat exported to China.

Yicai acknowledged that China's imports of Russian wheat have been kept to a trickle due to concerns that it could transmit a fungus--TCK smut. Concern that the fungus could spread to Chinese wheat has prompted Chinese authorities to go slow on importing wheat from Russia. This is also a risk, although Yicai did not identify it as such.

When China's border authority approved wheat imports from Russia in 2016, only four regions were allowed to export to China due to concerns about fungus. In 2017, the Manzhouli border crossing in Inner Mongolia began importing Russian wheat, but all of the grain had to be processed at the border crossing before entering China. In 2021, China's COFCO trading company imported 667 tons of wheat from Russia's Far East at the Heihe border crossing but the wheat had to be unloaded at a customs warehouse.

The Russia-China phytosanitary agreement on wheat trade announced in February 2021 allowed imports of wheat from all regions of Russia, but it included numerous stipulations aimed at preventing transmission of TCK smut and other harmful organisms. Russia wheat can only come from areas free of TCK smut and can only be spring wheat used for industrial processing. The document stipulates that Russia must monitor presence of harmful organisms to allay Chinese concerns and issue a notice and cease shipments of wheat from regions where TCK smut is detected. Russian wheat must be shipped to China in dedicated transportation equipment; soil, plant debris and weed seeds must be removed; and shipments of spring wheat cannot be being mixed with winter wheat or wheat from regions with smut. 

Russian trade data shows there has been a huge increase in Russian wheat exports to "unidentified" destinations, from 12,000 tons to 1.6 million tons between 2019 and 2021, suggesting the possibility of booming illicit trade with China. 

Yicai does not clearly explain the rationale for importing low-quality wheat which China already has in abundance. The China Agricultural University Professors speculate that Russian wheat could be used as animal feed to replace imported corn and soybeans due to its low price and protein content exceeding that of corn. 

Russian and Ukrainian wheat exports go primarily to countries like Turkey, Egypt, Nigeria, Azerbaijan, and other middle eastern, African and Asian countries that are less discerning on quality. Thus, if China did import wheat from Russia and Ukraine, Chinese pigs and chickens would be competing with humans in the Middle East, Africa, and South Asia for wheat from the Black Sea region. 

Yicai speculated that Kazakhstan could be a potential source of milling-quality wheat imports, but China's imports of Kazakh wheat fell from 400,000 to 179,000 metric tons between 2019 and 2021. 

In an apparent example of import diversification, China's wheat imports from Lithuania grew from 0 to 300,000 metric tons between 2018 and 2020--but imports fell to zero again in 2021 after Lithuania allowed Taiwan to open an embassy there.

Clearly China is politicizing grain trade...and perhaps maneuvering for a war of its own.

China's "food security" pronouncements are becoming more unhinged and inconsistent as its "food security" objectives expand. The kooky idea of reducing risk by importing from countries at war and under international sanctions follows up a year of pronouncements that China can magically reduce its reliance on imported soybeans and corn by recommending use of other ingredients that are also imported and yet another campaign to increase soybean self-sufficiency.

China's propaganda appears to have sunk into Orwellian absurdity to support the ambitions of a leader desperate to solidify his hold on power. This has happened before in China. It resulted in the worst-ever famine and ended with China importing 10-to-15 million tons of wheat annually in the 1980s after that leader finally left the scene.  

Virus Lockdowns; Farmers Must Plant Crops

Chinese officials are locking down millions of people to prevent the latest spread of the covid-19 virus, but they need to make exceptions for hundreds of millions of farmers dispersing to their fields to plough, seed and fertilize their crops this spring.

During March, China had nearly 104,000 covid-19 infections detected in 29 of the country's 31 provinces, according to China's National Health Commission. The cases are widely spread and occurring frequently, prompting stronger virus prevention and control lockdowns and mass-testing. The highly contagious Omicron variant makes the virus situation "severe and complicated," the commission said. 

The conflict between epidemic control and spring farm work has come to the fore in Jilin Province, one of the two primary case clusters (Shanghai is the other) and a northeastern province that is one of the country's top suppliers of corn. 

Spring field work in China

Jilin Provincial Governor Han Jun held an April 1 video conference where he stressed that virus control and spring panting are both at a critical stage and must both be considered priorities. The main concern voiced at the meeting was that rural people may be locked down in quarantines at urban work sites or their village homes--preventing them from returning to their fields to plough, plant seeds, fertilize and conduct other field work. Governor Han--a long-time rural policy advisor in Beijing before being posted to Jilin--called for measures to ensure that farming tasks are not delayed by a single day, that no household is left behind, and that not a single plot of land is left idle. 

The Ministry of Agriculture and Rural Affairs sent a team to Jilin Province headed by the chief veterinarian to coordinate the spring cultivation and virus prevention work.

Four categories of tasks are planned for spring planting in Jilin:

• Organize the return of farmers to the countryside for farm work under a closed-loop management system, with family units carrying out work while maintaining distance from other families.
• Organize farmers cooperatives, service-providing organizations, and other new types of farm operations to cultivate and seed fields, transplant seedlings and control pests on behalf of rural families.
• Unblock distribution channels for agricultural inputs such as seed, fertilizer, and pesticide. Open "green channels" eligible for reduced tolls and fees and expedited transportation to suppliers and shops.
• Ensure that operators supplying mechanized ploughing and seeding services are able to travel around the countryside to serve fields in various regions.

Farmers Daily issued an article instructing rural officials nationwide to coordinate epidemic prevention with spring farming activities to ensure that the farming time is not missed and lay a foundation for a bumper grain harvest. 

A similar exhortation was issued to farmers during the first pandemic spike in February 2020. 

Advising a farmer about spring farm work

An article describing preparations in a district of Gansu Province posted on the Agriculture Ministry's web site appears to be intended as a model for rural officials. In Liangdang County Gansu Economic Daily observed that a subdued and carefully planned dispersal of workers to fields has replaced the usual lively scene of farmers descending on the fields for spring work. Units composed of family members take turns going out to fields to conduct various tasks. At any one time, some may be ploughing, while others prepare for seeding, others build sheds for vegetable seedlings, and others fertilize and weed fields. 

New cases have been reported mainly in Shanghai and many provincial cities, but small cities in agricultural regions like Jiamusi in Heilongjiang, Xinxiang in Henan, Langfang in Hebei, and remote places such as Heihe on the Russian border and a Mongolian Autonomous Prefecture in Xinjiang have also reported cases. Extensive testing that catches asymptomatic cases is probably not being conducted in rural areas. In Beijing infections have been limited to medical personnel (hmm, how did they get infected?). Positive test samples were found in two fruit markets in two Beijing suburbs, but no people in the markets tested positive. 

Government officials do their part for spring planting, posing for the camera.