Agriculture

Facing extinction

China’s soya bean industry complains of foreign competition

Not making a bean?

“You’ve got to do something, they’re putting us out of business!’ It’s a refrain often heard from defunct factory workers in places like Milwaukee, Milan and Manchester. But you might be surprised to hear a similar sentiment from China.

However, that’s exactly what the country’s soya bean farmers and processors are shouting. They claim they’re being undercut on price and driven out of business. And they’re pointing the finger at a short list of multinational agribusiness giants: ADM, Cargill, Wilmar, Bunge, and Louis Dreyfus.

Soya beans originated in northeast China over 5,000 years ago, and became an important source of protein. They remain a popular food, and are increasingly used for cooking oil and as animal feed (to satisfy a wealthier China’s craving for meat).

Once the largest exporter, China is now the world’s biggest importer of soya beans. Imports have increased rapidly in recent years, especially after China joined the WTO in 2001. Imported varieties are almost entirely genetically modified, whereas the domestic crop is GM-free. China grows about 16 million tonnes of soya bean annually, but had to import a record 42 million tonnes last year (largely from the US and South America).

Imported soya beans now account for over 70% of Chinese consumption, and are much cheaper than those Chinese farmers can grow. China will spend an estimated $7.5 billion on US beans this year, for example. Local observers say that’s not down to any technical superiority, but something more simple: unfair farm subsidies. A recent CCTV report noted that: “[US] farmers can receive $59.10 of government subsidies for every tonne of soya beans.” The broadcaster does the math: “That’s around Rmb400, which is precisely the average price gap between domestic and imported soybeans.”

That’s great for Iowa farmers, but the low price has hit growers in Heilongjiang province – China’s soya bean heartland – especially hard. The 21CN Business Herald reports that they have had to stockpile half of their harvest. “We have turned to growing corn because soya beans are now so cheap we can’t make any profit,” farmer Liu Hui told CCTV, “Only a few farmers in our county choose to cultivate soya beans.”

Another reason cited to explain why imported beans have made such deep inroads is that the multinational agribusiness companies control much of the processing industry. It’s estimated they now have stakes in 80% of the country’s capacity. Their factories are located largely in the south and on the coast, with easy access to ports but far from local farms.

Local processors complain that foreign investment has created the overcapacity that’s forcing them to shut down. “It’s a threat to the security of the whole industry,” an official from the Heilongjiang Soybean Association told the 21CN Business Herald.

The situation remains dire for local processors. “It has been a month since we stopped production,” says Liu Yulin, general manager of Yanglin Soybean Group, “Compared with imported soya beans, processing one tonne of domestic soya beans leads to a loss of Rmb70-80, not to mention any profit.”

There have been calls for the Chinese government to step in with anti-dumping duties of its own. So far that’s been resisted, but things could change if a trade war heats up. “China will have to face more fierce trade conflicts with its major trading partners this year,” Wan Jifei, chairman of the China Council for the Promotion of International Trade told the China Daily on the sidelines of last week’s NPC legislative meetings, “China should consider… lodging more appeals [in the WTO] against imports from foreign countries.”


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.