Go­ing Against the Grain

Soy­bean Pro­duc­tion:

NewsChina - - CONTENTS - By Xu Hang

It was har­vest time for soy­beans in Heihe, North­east China's Hei­longjiang Prov­ince, when Newschina's re­porter paid a visit. On the fields, dried leaves could be seen fall­ing from branches and gen­tly touch­ing the plants was enough to make the ripe beans burst from their pods.

As one of China's main soy­bean pro­duc­tion ar­eas, Heihe has more than 1.49 mil­lion hectares of farm­land and the re­gion con­trib­utes around one-ninth of the coun­try's to­tal soy­bean pro­duc­tion. With the gov­ern­ment in­tro­duc­ing in­cen­tive poli­cies to pro­mote soy­bean farm­ing in re­cent years, lo­cal farm­ers have be­gun to shift their pro­duc­tion away from wheat and maize.

Due to the re­cent es­ca­lat­ing trade fric­tion be­tween the US and China, the coun­try is work­ing harder to seek an al­ter­na­tive sup­ply of soy­beans.

Re­gain­ing Ground

The soy­bean orig­i­nated in east­ern China, and China used to grow its own soy­beans for do­mes­tic use in food and live­stock feed. It was even a pri­mary ex­porter of soy­beans be­fore the mid-1990s.

There is ev­i­dence that soy­beans were farmed as far back as 4,000 years ago. But the sit­u­a­tion has changed dra­mat­i­cally in the past decade. Along with the pro­mo­tion of hy­brid maize which gen­er­ates greater prof­its, farm­ers who used to grow soy­beans shifted to maize in­stead.

Back in 2007, food se­cu­rity con­cerns prompted the Chi­nese gov­ern­ment to launch poli­cies that fa­vored maize grow­ing and promised a bot­tom pur­chas­ing price for maize re­gard­less of mar­ket rates. This be­gan com­pe­ti­tion be­tween soy­bean and maize pro­duc­tion, and since maize en­joyed bet­ter har­vests and fetched a bet­ter price, more farm­ers in north­east­ern China shifted to maize. This cre­ated an over­sup­ply of maize and a soy­bean deficit.

Statis­tics in­di­cate that by July 2016, stor­age of maize in­side China amounted to 260 mil­lion tons, ac­count­ing for over half of the coun­try's to­tal food stor­age ca­pac­ity. The cost for the coun­try to main­tain its stores of maize eclipsed 60 bil­lion yuan (US$8.6 bil­lion). In 2016, the gov­ern­ment started to reshuf­fle its plant­ing struc­ture and ceased pro­mot­ing maize pro­duc­tion. New in­cen­tives for plant­ing soy­beans in north­east­ern China came into ef­fect af­ter the move.

Hei­longjiang Prov­ince started a pi­lot crop ro­ta­tion project in 2017. That was when Wang Ji­uyi, a farmer in Ai­hui Dis­trict of Heihe split his farm­land into soy­bean and maize crops.

Plant­ing the same crop again and again can cause de­te­ri­o­ra­tion of land fer­til­ity, dam­age the soil and agri­cul­tural re­source en­vi­ron­ment, and thus a new pi­lot pro­gram pro­mot­ing crop ro­ta­tion was

started by the Min­istry of Agri­cul­ture along with some other gov­ern­ment de­part­ments. A guide­line for pro­mot­ing soy­bean pro­duc­tion by the Min­istry of Agri­cul­ture says the goal is to “ex­pand plant­ing of soy­beans to 9.3 mil­lion hectares by 2020.” Ac­cord­ing to the guide­line pol­icy, crop ro­ta­tion could earn 2,240 yuan (US$322) per hectare in crop sub­si­dies.

Ad­di­tion­ally, Hei­longjiang and neigh­bor Jilin Prov­ince have rolled out their own sub­si­dies to en­cour­age farm­ers to grow more soy­beans be­yond crop ro­ta­tion farm in­cen­tives. In Hei­longjiang in 2017, the lo­cal gov­ern­ment of­fered sub­si­dies of around 2,600 yuan (US$373) for each hectare of soy­beans planted, and in­creased the amount to 2,985 yuan (US$430) for each hectare of soy­beans planted by this year. Sub­si­dies for maize dropped from 2,298 yuan (US$330) to 1,992 yuan (US$ 286) in 2017, and fur­ther down to 1,493 yuan (US$214) by this year.

With the chang­ing pol­icy, plant­ing one hectare of soy­beans could re­turn farm­ers more than US$200 in gov­ern­ment sub­si­dies com­pared with plant­ing maize. Farm­ers, in­clud­ing Wang Ji­uyi, started to ad­just how they worked. In 2017, Wang ear­marked half of his 876 hectares of farm­land for soy­beans, while in 2018, un­der the new in­cen­tive pol­icy, he planned to de­vote an ex­tra 267 hectares to soy­bean plant­ing.

Im­port De­pen­dency

Ac­cord­ing to Jiao Shukai, for­mer deputy di­rec­tor of the Soy­beans In­sti­tute of the Jilin Academy of Agri­cul­tural Sciences, two rea­sons the soy­bean in­dus­try has dwin­dled in re­cent times are hy­brid maize and the soy­bean im­port mar­ket.

When it joined the WTO in 2001, China agreed to open its soy­bean oil mar­ket to in­ter­na­tional sup­pli­ers, be­com­ing a ma­jor soy­bean im­porter from the US, Brazil, and Ar­gentina. Statis­tics in­di­cate that in 2017 the Chi­nese mar­ket con­sumed more than 110 mil­lion tons of soy­beans, ac­count­ing for over one-third of soy­bean pro­duc­tion glob­ally. Of this, 95.5 mil­lion tons or about 87 per­cent of the to­tal were im­ported, with soy­beans im­ported from the US ac­count­ing for 32.84 mil­lion tons, or 34 per­cent. How­ever, that huge de­mand was mainly for ge­net­i­cally mod­i­fied soy­beans, which are not per­mit­ted to be grown in China.

With a bet­ter im­mune sys­tem re­sult­ing in higher GM soy­bean pro­duc­tion, GM soy­beans be­came more com­pet­i­tive than do­mes­tic ones in the mar­ket.

In 2017, un­der the in­cen­tive pol­icy, farm­land cov­er­age for soy­bean plant­ing in­creased by 580,666 hectares do­mes­ti­cally to 7.8 mil­lion hectares with to­tal pro­duc­tion of 14.2 mil­lion tons of soy­beans. De­spite the in­crease, it was far from enough to meet the huge Chi­nese de­mand. For now, at least, im­ports from coun­tries other than the US have picked up.

Gai Junyi, a sci­en­tist at the Soy­bean Re­search In­sti­tute, from Nan­jing Agri­cul­ture Uni­ver­sity, pointed out that do­mes­tic pro­duc­tion can only meet the de­mands of food pro­cess­ing, while an­i­mal feed and oil pro­duc­tion from soy­beans, which ac­counts for 85 per­cent of the to­tal mar­ket, can­not be met by do­mes­tic pro­duc­tion ca­pac­ity. An of­fi­cial from the Min­istry of Agri­cul­ture, who asked not to be iden­ti­fied, told this re­porter that it would re­quire an ex­tra 53.3 mil­lion hectares of arable land to pro­duce enough soy­beans for the do­mes­tic mar­ket. The rea­son China set a three per­cent tar­iff on soy­bean im­ports when it joined the WTO was to pro­mote high value-added prod­uct man­u­fac­tur­ing with cheap im­ported soy­bean ma­te­ri­als, as well as sav­ing more arable land for pro­duc­tion of other grains to guard food se­cu­rity.

With the in­creas­ing low-cost soy­bean sup­ply, China grad­u­ally formed a chain of prod­ucts in­clud­ing soy­bean oil, an­i­mal feed pro­duc­tion, and an­i­mal hus­bandry. Ac­cord­ing to the source from the Min­istry of Agri­cul­ture, the pro­duc­tion ca­pac­ity of soy­bean oil to­taled 150 mil­lion tons in 2017, and new oil com­pa­nies

mush­roomed ac­cord­ingly. How­ever, ex­ces­sive de­pen­dence on im­ported raw soy­beans made the do­mes­tic pro­cess­ing in­dus­try for soy­beans frag­ile in the face of fluc­tu­at­ing global soy­bean prices.

Hei­longjiang once had a sig­nif­i­cant num­ber of lo­cal soy­bean oil pro­duc­ers that used lo­cal soy­beans as ma­te­rial, but fierce com­pe­ti­tion from im­ported GM soy­bean sources saw al­most all the com­pa­nies col­lapse.

Hei­longjiang Da Mu Ren An­i­mal Hus­bandry Co. Ltd. is a firm that deals with pur­chases of soy­bean meal as an­i­mal feed. Com­pany CEO Fan Xushi has no­ticed in re­cent years that lo­cal oil press­ing mills in Hei­longjiang have low­ered their pro­duc­tion ca­pac­ity to less than 1,000 tons, while mills in coastal ar­eas of China en­joy much higher pro­duc­tion with an av­er­age of over 5,000 tons.

“Do­mes­tic soy­bean oil residue is not ideal ma­te­rial for soy­bean meal pro­duc­ers com­pared with im­ported soy­bean prod­ucts, not only due to the price, but also be­cause of the higher wa­ter con­tent and more un­sta­ble protein el­e­ments of do­mes­tic strains,” Fan told Newschina. The re­cent trade con­flict be­tween the US and China, ac­cord­ing to Fan, could re­sult in higher feed prices for live­stock, thus putting pres­sure on the pig hus­bandry mar­ket.

Statis­tics in­di­cate that do­mes­tic sup­ply and de­mand for pigs in 2018 re­mains sta­ble, with a slight ten­dency of over-sup­ply. The slaugh­ter price for live hogs has fallen be­low cost price on the do­mes­tic mar­ket. Once the price of soy­bean pulp, which ac­counts for some 20 per­cent of the an­i­mal feed mar­ket, starts to fluc­tu­ate, pig farm­ers and pork meat pro­ces­sors will all en­counter mar­ket setbacks.

New Op­por­tu­ni­ties

As the world's big­gest buyer of soy­beans, China pur­chases around a third of its to­tal de­mand for soy­beans from the US. Higher tar­iffs on US soy­beans which push up the price have led the na­tion to find al­ter­na­tive ways to se­cure its soy­bean sup­ply.

On Septem­ber 4, at the Third China Soy­bean In­dus­try In­ter­na­tional Sum­mit Fo­rum held in Harbin, two Rus­sian farm own­ers at­tracted a great deal of at­ten­tion. Quite a num­ber of Chi­nese farm­ers have cho­sen to farm in Rus­sia given the present tur­bu­lence. Since 2015, about 1,000 Chi­nese farm­ers go to Rus­sia an­nu­ally, in­clud­ing Wang Zhaodong, a re­searcher at the North­east­ern Agri­cul­ture Uni­ver­sity in Hei­longjiang Prov­ince.

Wang fo­cuses his stud­ies on soy­bean cul­ti­vars, and he chose to plant his strain in Rus­sia due to the lower cost of agri­cul­tural land and the trans­porta­tion chain. Rent for farm­land in Rus­sia is much lower than in China. This Au­gust, ac­cord­ing to Sput­niknews, Rus­sia plans to pro­vide up to 300,000 tons of soy­beans to China. There are op­ti­mists who be­lieve farm­ing in Rus­sia could sup­port China's high de­mand for soy­bean ma­te­rial, while pes­simists say Rus­sia-pro­duced soy­beans can­not fill the big soy­bean short­fall at the present time.

Af­ter the trade dis­pute be­gan, many do­mes­tic pig farm­ers started to lower the pro­por­tion of soy­bean pulp in their an­i­mal feed. In­dus­try in­sid­ers also pro­posed cut­ting the amount of protein used in live­stock feed, claim­ing an­i­mals could get by with less than is re­quired at the mo­ment.

An ex­pert from Min­istry of Agri­cul­ture told Newschina that the low­est pro­por­tion of soy­bean pulp is around 15 per­cent. “This base­line is to se­cure the qual­ity of the hog while min­i­miz­ing the soy­bean con­tent in feed,” added the source from the min­istry.

There are also at­tempts to re­place protein con­tent in the feed with sci­en­tific tech­niques such as ad­just­ing amino acids. A re­search fel­low with a listed feed com­pany told Newschina that to meet a pig's de­mand for protein re­quires balanc­ing a num­ber of dif­fer­ent amino acids. “The ques­tion for re­searchers now is how to en­sure the right bal­ance of amino acids to at­tain proper protein for the an­i­mals,” said the re­search fel­low. But do­mes­tic re­search re­mains at the pre­lim­i­nary stage.

Soy­beans are har­vested in Hei­longjiang Prov­ince, Septem­ber 17, 2013

Aerial view of farm­ers dry­ing har­vested soy­beans, Oc­to­ber 23, 2018

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