Crop growers eye rural China

Bottles of soybean oil are for sale at a supermarket in Beijing. US exporters sold 16.9 million tons of soybeans as of Sept 3, of which 10.2 million tons were bought by China, the biggest buyer of US soybeans. Bloomberg News

China's imports of US soybeans are unlikely to be affected by a trade dispute between the two countries over exports of Chinese tires, said Li Ming, general manager of the agriculture trading and logistics department of China National Cereals, Oils & Foodstuffs Corp (COFCO).

Concern spread earlier this month that US tariffs imposed on tires from China would spark a retaliatory slowdown in purchases of US crops and farm products.

The US placed tariffs of 35 percent on tires from China early this month, acting on a union complaint that imports were pushing workers out of jobs.

Following the US actions, China announced a probe into the alleged dumping of American automotive and chicken products.

China is the biggest buyer of US soybeans and the second-largest importer of poultry and pork.

Soybean growers in the United States, the world's biggest supplier, want to increase livestock feed sales to small landowners in rural China to help boost exports, the United Soybean Board reported.

China's feed industry consumes about 100 million tons of protein meal annually, with half of that used by small land- holders who often feed table scraps to their chickens, hogs and dairy cows, said Thomas Wray, a director of the board that helps market US soybeans internationally.

Only about 30 percent of China's protein meal needs are met with soybean meal, Wray said.

China's untapped rural feed industry "is the largest meal market in the world," Wray, a Kansas soybean grower, said during a recent interview in Cebu in the Philippines.

"It's a huge opportunity. What we've got to do is to continue to educate the rural part of China on how to feed their animals," he said.

US growers are counting on expansion of the world's third-largest economy to boost demand for meat and to encourage China's farmers to switch to feed-meals to lift productivity. Soybean futures have dropped 21 percent since the end of May on a forecast for record US output in the 2009-2010 marketing year.

China's economy expanded 7.9 percent in the second quarter from a year earlier, fueled in part by 4 trillion yuan in stimulus spending.

In 2008, bilateral trade amounted to $333.74 billion, making China and the United States each other's second-largest trading partners.

In the past five years, American exports to China grew by 20 percent annually. Last year, China accounted for 49 percent and 34 percent of American soybean and cotton exports, respectively.

COFCO, the country's largest oil and food producer, plans to build a soybean processing plant in southwestern China's Guangxi Zhuang autonomous region with a capacity of 1.2 million tons a year, according to a Xinhua News Agency report.

The report, citing sources familiar with the project valued at 1.85 billion yuan, stated that construction would likely be in Qinzhou in the Beibu Gulf economic zone.

In April, COFCO opened a 4 billion yuan oil-pressing project in Tianjin.

China's major edible oil producers, including Sino Grain Oils & Fats Industrial Co and Jilin Grain Group, also plan to open new factories to boost capacity.

Per capita edible oil consumption is 14.5 kilograms a year in China.

However, the National Development and Reform Commission (NDRC), China's top planning body, warned that the soy crushing capacity of the world's largest soy importer was far larger than needed -- suggesting the Chinese government could push for consolidation in the sector.

Besides excessive expansion in steel and cement sectors, over-capacity in the shipbuilding, aluminum and soy crushing industries were also worrisome, said Chen Bin, a department director with the NDRC.

The government would further curb such expansion next and push for restructuring of those industries, Chen was quoted by the 21st Century Business Herald as saying. He said some provinces were still building or planning to build new plants.

Industry officials said that about half of the country's 80 million tons of annual soy-crushing capacity was not operating last year, and added that the situation is unlikely to improve this year.

In 2007, only 44 percent of capacity was in operation, and many of the closures were plants with a daily capacity below 1,000 tons, according to the report.

The Chinese government encouraged a restructuring of the industry to form some big companies that would have better logistics and port facilities, Liu Xiaonan, a commission official, said at a soy conference last month.

Liu said the government was encouraging soy plants to sign long-term contracts to ensure supplies because China relies heavily on imports.

Agencies

(China Daily 09/28/2009 page5)