China's Soybean Revitalization Fizzles

As China's 2024 harvest for soybeans kicks off with prices plummeting it is clear that authorities in China are losing a years-long battle to reduce reliance on imported soybeans. 

China's Ministry of Agriculture and Rural Affairs' 2021-25 five-year plan set a target of boosting soybean production to 23 million metric tons (mmt) by 2025, a feat that officials predicted would raise China's soybean self-sufficiency by 6-to-7 points. However, the Ministry's October CASDE supply & demand estimates indicate that 2024 production reached only 20.45 mmt, slightly less than last year's output and 2.5 mmt short of the 2025 target. CASDE estimates this year's soybean area at 10.16 million hectares, also short of the 10.667 million hectare target for 2025.

CASDE estimates China's soybean imports in the 2024/25 marketing year at 94.6 mmt. Combined with the production estimate this implies a 17.8-percent self-sufficiency rate. That's higher than the 4 years only because CASDE has a low-ball estimate of imports. (CASDE has a history of underestimating imports: CASDE's forecast for 2023/24 soybean imports made a year ago was about 5-mmt under the actual number.)

Another MARA monthly agricultural market situation report said that Chinese soybean prices are weakening as newly harvested beans hit the market in northeastern China while output in the U.S. and Brazil puts downward pressure on international prices. The report noted that USDA estimates world soybean output in 2024/25 is up 8.7 percent year-on-year alongside record-high inventories. 

According to the report, 

• Domestic Chinese soybeans delivered to processors in Shandong Province averaged RMB 5,100 per metric ton, down 11.3 percent from a year earlier. 
• Imported soybeans C&F prices including duties averaged RMB 3,880 per metric ton, down 19.7 percent year-on-year.

Procurement prices compiled from China's National Administration of Food and Commodity Reserves indicate a steep drop in soybean prices in the first half of October 2024. The average soybean procurement price on October 23 (RMB 3835/mt) was 22 percent less than a year ago and 35 percent below the price in October 2022. 

Data from China National Administration of Food and Commodity Reserves.

China has wasted huge amounts of money and resources achieving a marginal increase in soybean output that has plummeted in actual value. 

The 2019 "number one document" declared a soybean revitalization plan, followed by a Ministry of Agriculture and Rural Affairs plan that called for setting soybean producer subsidies to incentivize production, disseminating high-yielding varieties, building high-standard fields, and forging close links between processors and growers.

The communist party's 2022 "number one document" instructed officials to implement the project to raise soybean and oilseed production capacity by offering soybean producer subsidies, promoting corn-soybean intercropping, switching from rice to soybeans in parts of Heilongjiang Province, and planting soybeans on saline soil. 

In 2023, Xi Jinping issued special instructions demanding an increase in soybean output with "measurable results." The 2023 "number one document" called for intensified efforts to expand soybean production. Four government departments offered a "combination punch" policy package of farm subsidies, transfer payments to major soybean producing counties, construction of soybean industry parks, soybean financing and credit, pilot insurance covering the full cost of production, procurement for reserves, to "send a clear signal" motivating farmers to plant soybeans. 

Earlier this year Heilongjiang Province said its 2024 soybean subsidy would be RMB 350 per mu. Subsidies in Jilin Province were said to be even higher: between 460 and 550 yuan per mu in various localities, while subsidies in Inner Mongolia were reported to be 314 to 340 yuan per mu.

At the October 16 procurement price 3896 yuan/metric ton with a yield of 130 kg per mu, the subsidy for Heilongjiang soybean farmers would comprise about 40 percent of their revenue.

In 2020 Heilongjiang also introduced a subsidy for soybean processing enterprises to reverse declining output and idle production capacity. The subsidy was given for processing soybeans produced in Heilongjiang or for soybeans imported from Russia (700,000-800,000 mt of soybeans are imported annually), subsidized working capital loans, capital investments, and funds for local governments. 

The provincial grain bureau's investigation to justify the subsidy found that Heilongjiang enterprises crushed 1.2 million metric tons of soybeans for oil and processed 1.75 mmt for tofu and other food products in 2019. The total of 2.95 mmt soybeans processed in Heilongjiang in 2019 was just 38 percent of the 7.8 mmt produced in the province that year. 

This year Chinese propagandists have been trying to paint a picture of optimism for China's soybean industry, a sure sign that things are not going well. 

On October 17 Economic Daily gushed over the "bright prospects" of the market for Chinese soybeans, citing growing demand for soy-based foods as people seek healthier diets, broadening the market space for development of China's soybean industry chain. However, MARA's monthly market situation report said the average price for food-grade soybeans in Heilongjiang Province dropped 9 percent year-on-year in September 2024. 

On October 25 Farmers Daily reported on strategies to expand China's soybean industry despite facing competition from low-priced imported soybeans: a mechanized 400-hectare operation that farms land on behalf of dozens of villagers, massive State Farms, aggressive procurement by government reserves with financial backing from the government's policy bank, a pest- and disease-resistant strain developed by the seed-breeding arm of Heilongjiang's State Farm system.