Cheaper soybean imports hurting China’s expensive domestic producers; Soybean is produced in the US, Brazil and Argentina through mechanized production, a method which allows high output at a low cost

Soybean imports hurting China’s domestic producers

Staff Reporter

2013-08-06

China purchased US$13 billion of soybeans from the United States last year, surpassing the funds spent on Boeing 787 Dreamliners to become the largest single item imported from the US, says Zhang Xiaoping, the Chinese representative at the US Soybean Export Council. The imports have hurt local soybean farmers, however, reports the Beijing Youth Daily, the official newspaper of the Communist Youth League in Beijing. Soybean originated in China, but 80% of its market has been taken over by genetically modified soybean imports.Wang Xiaoyu, secretary-general of a soybean association in the northeast province of Heilongjiang, said domestic soybean production was pegged at 12.9 million tonnes last year, compared with the 58.38 million tonnes imported from overseas.

Since the US Soybean Export Council opened its office in China in 1982, imported soybean has gradually taken the market of domestically grown crops, with imports surging tremendously over the past decade, the paper said. The volume of imported soybean skyrocketed from 111 tonnes in 1996 to 5,838 tonnes last year.

Dai Jingrui, a professor at China Agricultural University in Beijing, said that imported soybean was able to take the Chinese market by storm because of a cost advantage. Soybean is produced in the US, Brazil and Argentina through mechanized production, a method which allows high output at a low cost.

Imports also contain a higher percentage of oil, so domestic oil processing companies prefer to use foreign beans, the paper said, adding that soybean imports are priced at 4,100 yuan (US$670) per tonne, while soybeans produced domestically are sold for 4,500 yuan (US$730).

Soybean planting in China has also declined substantially over the years, particularly in Heilongjiang, the main production base for the beans. In 2010, 64.7 million acres of land was allocated in the province to grow the crop, but it dropped to 51.93 million acres in 2011 and less than 40 million acres as of last year.

Domestic oil processing factories, which had originally purchased locally-grown soybean, are also facing a crisis. Most factories in Heilongjiang have halted production. Of the 88 factories that have the ability to produce 200 tonnes of oil, only six remain operational.

Many in the industry, including Wang, have expressed concern over the China’s reliance on foreign GMO imports, with Wang emphasizing that locally-produced beans are proven to be safe. However, Dai said that the GMO soybeans have been deemed safe and approved for import by the government.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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