The ISA trade team met with representatives from Huamei Oil
Today, the trade group met with representatives from Huamei Oils, where we visited their port facilities and a soybean crushing plant that is currently closed for renovation. Once the plant opens in June, Huamei Oils anticipates purchasing the equivalent of a Panamax shipment of soybeans each month. Of course we hope those soybeans come from the United States, but the general manager of the facility said repeatedly that the price is the main criteria for their purchasing decisions.
As we visited the crushing plant, ISA CEO Kirk Leeds was reminded of the overcapacity of crushing facilities in China. Because the government decided to make investments into crushing plants a priority a few years ago, it is estimated that China currently is 50 percent over capacity.
Representatives from Huamei Oil showed the ISA trade team their port facilities.
Kirk expects this over capacity will drive China’s interest in purchasing whole beans instead of soy meal or oil. This trend will continue to put more pressure on U.S. crushers, who are already challenged by the flat or only slightly increasing demand for meal by the U.S. livestock industry. He anticipates that the export of the majority of the crop will continue. (United States soybean exports exceeded 60 percent this past year.)
He adds that this trip is a reminder of the importance of getting trade agreements in place so U.S. soybeans can be sold into markets created in China and other fast growing markets around the world.
For more comments from Kirk Leeds, click here:
China is, by far, the largest importer of U.S. soybeans and expects to set a new record for soybean imports again this year. One wonders if this trend can possibly continue, or if it’s wise to put all of our eggs (or soybeans) in one basket. However, I think the time has passed to doubt this market.
China is a real economic force to be reckoned with, and cannot be ignored. Last week, the World Bank predicted that China will overtake the United States as the world’s largest economy in 2030. In 2010, China overtook Japan to become the world’s second largest economy. China’s target is 8 percent GDP growth for this year, and average annual GDP growth of 7 percent in each of the next five years.
It is also estimated that by 2030 the country’s per capita income (measured in terms of purchasing power parity) may reach 50 percent of the per capita income in the United States. In addition, it is estimated that 70 percent of the population is likely to be urban by 2030. Currently, about 50 percent of China’s residents live in urban areas.
In an unusual divergence of cultures, this "spirit house" is located in the shadow of several large wind turbines.
What does this mean for U.S. soybean growers? Huge opportunity, if we continue to build relationships with customers in China. If China hopes to feed an increasingly urban and well-off population, it must continue to increase imports of soybeans, as well as corn, rice and other commodities.
The United States is uniquely positioned as the most reliable source of commodities, but we must continue to invest in production research to increase the protein and oil of the soybean and raise the yield. We must also invest in the U.S. transportation infrastructure, so we can maintain our competitive advantage. And of course, as we’ve already mentioned, trade access will be increasingly important for U.S. soybean growers.
And finally, we asked ISA President Elect Dean Coleman to share his perspectives on his first trip to China. Dean noted the stark differences in this country. “It’s like two different worlds in one place,” he commented.
After meeting with some of U.S. soybean growers’ key customers here, Dean commented,” It’s extremely important to meeting our customers in person. They grab your hand and greet you like you’re best friends, and that’s what we’re trying to do so they think of us first when they’re buying soybeans.”
To hear Kirk Leeds’ interview with ISA President Elect Dean Coleman, click here:
Tomorrow we travel to Guangzhou, where we will meet with representatives of Dongling/Green Oil.