Soybean imports set to slide in H2 as domestic meat demand weakens

Imported soybeans are offloaded in Nantong Port, Jiangsu province. China imported 34.2 million metric tons of the crop in the first half of 2014, mainly from the United States. Xu Congjun / For China Daily

Soybean imports will shrink in the second half as demand declines, the result of a slowdown in meat demand and high import volumes in the first six months.

Already the world's largest soybean importer, China imported 34.2 million metric tons of the crop in the first half, mainly from the United States. That was up 24 percent year-on-year.

Wang Suiyuan, vice-president of the China Feed Industry Association, said that weaker economic growth and declining domestic demand for meat products are affecting the soybean market. The crop is a key component of animal feed.

China "has experienced lower chicken and hog output, affected by bird flu and declining live pig supplies, since the second half of 2013. Output was also affected by recent typhoons that hit key aquaculture areas in coastal provinces such as Shandong, Zhejiang, Fujian and Hainan," Wang said.

The association forecast year-on-year declines in the output of meat, poultry and eggs in 2014.

Frequent rainstorms in south China from April to July affected demand for aquatic feed, and the output of that product will also fall this year.

China produced 83 million tons of feed in the first half of 2014, down 3 percent.

"Livestock farms and aquafarms have all cut demand for soybean meal," Wang said. "Domestic oil-pressing companies therefore are still holding a large amount of soybean meal after producing the oil, and they haven't found a sales channel in the domestic market yet."

In an effort to ease their financial burden, Chinese oil - pressing companies doubled their exports to 1.36 million tons of soybean meal in the first half. Japan, South Korea, Vietnam and Indonesia were the main consumers.

Ding Lixin, a researcher at the Chinese Academy of Agricultural Sciences in Beijing, said that imports are likely to sink between August and October, as a surge in imports that started at the end of 2013 has created a glut and cut oil - pressing plants' profits. Inventories at ports now stand at 7.4 million tons.

"Even though the margins of Chinese crushing companies are on the mend, there's limited room for further improvement as soy oil prices are still weak," Ding said. "Importing more soybeans won't effectively improve their financial situation."

Crushers were losing $80 to produce a ton of soy oil in February, but things had improved by July, when they were making a profit of $10 a ton.

Sha Yusheng, deputy secretary-general of the CFIA, said China's feed industry is undergoing rapid consolidation this year, after the majority of feed enterprises posted a loss in 2013. Small and medium-sized companies will continue to face difficulties. Large companies are expanding capacity while also keeping a close eye on costs.