China’s Soybean Imports Continue to Rise as Trade Tensions Ease
Although the U.S.-China phase one trade deal signed Wednesday didn’t include a detailed soybean purchase plan, China’s imports of the product have already recovered in anticipation of improved trade relations between the two countries.
Soybean imports by China rose 67% from November to 9.54 million tons last month, the highest level in four months, according to customs data released Tuesday. The surge in December resulted in an increase in full-year imports of 0.5% compared with 2018. In inbound shipments declined 4.1% in 2018, the first drop in seven years.
Soybean imports are expected to further increase this year, China’s agriculture ministry said Wednesday in a press conference.
As part of the trade deal signed Wednesday, Beijing agreed to purchase an additional $32 billion of U.S. agriculture products above the 2017 baseline of $24 billion over the next two years. That includes $12.5 billion this year and $19.5 billion in 2021, according to the text of the trade deal posted Thursday on the website of China’s finance ministry.
In 2017, soybeans accounted for more than half of China’s total imports of agriculture products from the U.S.
“China’s market is huge,” said Zhang Xiaoping, director of Greater China at the U.S. Soybean Export Council. “Soybeans obviously account for a significant part in U.S.-China trade.” Even though the accord didn’t elaborate on soybean trade, it did help to stabilize market confidence, Zhang told Caixin.
China is home to 20% of the world’s population but has only 7% of the world’s farmland resources. For many agricultural products, China depends on imports. The country is the world’s biggest consumer of soybeans, eating up 110 million tons every year. With domestic output reaching only around 16 million tons a year, 90% of its demand is imported.
The U.S. is the world’s biggest grower of soybeans, producing 123 million tons of the legume in 2018. Before the trade war, it accounted for one-third of China’s imports. But in the first half of 2019, the U.S. share sank to just 15.4% and Brazil took the top spot with more than 70%, customs data show.
The decline came after China slapped import tariffs of 25% on U.S. soybeans in July 2018 and more later, increasing the total duty from 3% to 33%. In September, China exempted some agricultural products from additional tariffs including pork and soybeans before a new round of trade talks.
Since September when the two countries returned to the negotiating table, the Chinese government has been encouraging companies to purchase more U.S. soybeans and other agricultural products. In the 2019-2020 marketing year ended Jan. 2, U.S. soybean orders from China reached 11.2 million tons, of which 9.4 million tons have been shipped, compared with 3.5 million tons of orders from China the previous marketing year, data from the U.S. Agriculture Department showed.
Soybeans are an essential ingredient in the Chinese diet — they are used for making soy sauce, cooking oil and tofu — and a key input of animal feed for chickens and pigs. China consumes around 60% of globally traded soybeans.
China’s heavy reliance on imported soybeans will be hard to change as a result of continuous urbanization, population growth and increasing demand for soymeal, said Zhang Zhen, a soybean industry expert at the agriculture ministry. He said he expects annual demand for imported soybeans to maintain between 80 million and 100 million tons.
Companies are optimistic about the outlook and are actively building up stocks, Zhang said.
After the outbreak of a devastating African swine fever epidemic in 2018 caused a plunge in pork supplies, the Chinese government launched a series of measures to restore pork production. The production of pig feed has been increasing, which will drive up soymeal demand.
Contact reporter Denise Jia (email@example.com)
Liu Jiefei contributed to this report.
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