With record acreage planted, U.S. soybean growers hope to expand exports to China this year as Chinese demand continues to increase, but competition from Brazil and concerns about U.S. genetically modified crops may dampen Chinese enthusiasm.
The U.S. Soybean Export Council says China is likely to commit to a big purchase of U.S. soybeans when a delegation from the Chinese Ministry of Commerce visits Des Moines, Iowa, on July 13.
The U.S. Department of Agriculture projects farmers will sow 89.5 million acres of soybeans this year, up 7.2% from the record 83.4 million acres in 2016. On average, 45 % of the soybean crop has been exported during the past 10 years, and the USDA estimates that will rise above 50% in 2017-18.
China has become the biggest buyer of U.S. soybeans, accounting for 62% of U.S. soybeans exports last year, worth more than $14 billion, according to the American Soybean Association.
Jerry Shi, deputy head of U.S. grains at COFCO Americas Resources Corp., China’s state-owned grain trading company, said China’s increasing demand for soybeans is driven by the country’s livestock industry, which feeds its animals soybean meal. “As we are promoting urbanization, we have people moving from the countryside to the city, so we expect a continued increase in meat, milk and eggs consumption,” said Shi.
However, growing Chinese demand does not guarantee a profit for U.S. farmers as large crops in Brazil also provide China with purchasing options.
“Soybean farmers in Brazil were reluctant to sell inventory as they were waiting for a stronger demand from the Chinese market to fetch a higher price,” Monica Tu, an analyst from Shanghai-based consultants JC Intelligence Co., said.
Mark Albertson, director of strategic market development at the Illinois Soybean Association, said Brazil isn’t the only competition: The real competitors are countries that grow palms and canola, which can replace soybeans to produce oil and feed animal. He said the U.S. must continue to produce large crops and keep prices low in order to keep competitive.
Chinese consumers’ concerns about the health effects of genetically modified crops also pose a threat to U.S. exports.
“Everyone says soybean oil made of GMOs soybeans is not good for health,” said Ling Liu, a housewife in Chongqing, China, in a phone interview. “It’s like those hormones. I don’t want my family to eat too much.”
A Nielsen survey last year found that about 70% of Chinese are cautious about at least one food ingredient, above the global average of 64%, with 57% mentioning GMOs as undesirable.
“There are a lot of countries that are very sensitive about genetically modified organisms and they don’t like U.S. soybeans, so the lack of universal acceptance of genetically modified beans is a challenge to U.S. farmers, especially to Illinois farmers because so many of our soybeans are exported,” said Peter Goldsmith, director of the food and agribusiness program at the University of Illinois.
Albertson said the U.S. could increase its competitive edge by investing in infrastructure.
“In Illinois, we move a lot of our soybeans on the river, but the locks and dams along the rivers are in need of repair and they are too small,” he said. “In order to get a barge pole through the locks, we have to separate it into two parts, and that takes a lot of time and it’s very expensive.”
Goldsmith said the competition and market pressures shouldn’t cause too much worry for U.S. soybean growers, however.
“Without our soybeans, their hog market wouldn’t be able to survive,” Goldsmith said. “There are simply not enough soybeans in Brazil and South America to supply China.”
By Mengjie Jiang