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Projections for China soy demand strong but tariffs keep U.S. farmers on sidelines

Article cover photo
U.S. soybean exports to China have declined by nearly two-thirds since the country imposed duties last summer on oilseed imports from its once-largest supplier. Xiaoping Zhang (pictured), U.S. Soybean Export Council’s regional director for greater China, predicts business will rebound once the countries resolve key issues. (Photo: Aaron Putze/Iowa Soybean Association)

By Aaron Putze, APR, ISA communications director

   

U.S. soybean exports to China have declined by nearly two-thirds since the country imposed duties last summer on oilseed imports from its once-largest supplier.

Business will rebound when the countries resolve key issues involving intellectual property, tech transfer and the timely approval of biotech traits, predicts Xiaoping Zhang, U.S. Soybean Export Council’s regional director for greater China.

The multi-billion-dollar question for farmers like Tim Bardole of Rippey is: How soon?

“We have good soybean yields and quality but this combination doesn’t do us much good when you’re having to sell at a loss,” said Bardole while participating in an Iowa Soybean Association (ISA) trade mission this week to China. “That doesn’t work for long.”

Strong appetite for soy

Xiaoping, in comments to Bardole and fellow ISA farmers and staff March 26 in Beijing, said the country’s appetite for soybeans is forecast to surge over the next decade.

Within ten years, the country of 1.4 billion people will import an estimated 122.9 million metric tons (mmt) of soybeans. That compares to 94 mmt in 2018 and an estimated 88 mmt this year.

“China would be well on its way and already hit 100 mmt if not for the trade dispute and impacts of African Swine Fever,” he said. “But there are other drivers at play that make China a very friendly long-term opportunity for soybean farmers.”

The country’s surging urbanization fuels some of the long-term optimism about the prospects for soy demand. Forty years ago, 18 percent of China’s population lived in cities.

Today, 58 percent-or about 840 million-live in the cities. An additional 300 million Chinese residents are expected to transition from small, rural villages to urban centers by 2030.

Xiaoping said per-capita income in cities is much higher than in rural areas, and the gap is increasing. More income is synonymous with greater food consumption.

“As more people move from rural to urban, it holds tremendous potential for increased consumption of pork, poultry and fish,” he said. “And that means greater demand for soybeans and soybean meal.”

Increased production of animal protein also spurs demand for soybeans. Despite government policies promoting more soybean acres and higher yields, the increased output will be negligible and do little to fulfill China’s annual demand for 350 mmt of animal feed.

Door ajar

That will leave the door ajar for soybean farmers in the United States, Brazil and Argentina.

“You can’t produce animal proteins like pork, chicken, eggs, milk and aquatic without producing feed,” Xiaoping said.

That’s especially true for a country that’s replacing small, inefficient farms with modern, large-scale animal production facilities.

“The backyard farmer used a variety of feedstuffs which slowed production,” Xiaoping said. “On the other hand, manufactured feed includes more soybeans and that improves animal performance.”

Given soybean meal occupies 80 percent of protein meal consumption in China, the transition from smaller to larger livestock, poultry and fish farms bodes well for Iowa and U.S. soybean farmers.

If they can access the market.

For now, U.S. soybean farmers continue to feel the sting of low prices brought about by a languishing U.S.-China trade dispute.

Data compiled by INTL FCStone shows U.S. soybean shipments to China totaled just 9.37 mmt – or just 344 million bushels -- through Feb. 28. Two years ago, China’s U.S. soybean imports reached a record 37 mmt – or roughly 1.4 billion bushels – an amount equivalent to nearly three Iowa soybean crops.

Tempered optimism

“I’m optimistic about China long-term as it will continue to be a large market for us,” said Bardole, who’s serving his fourth year as an ISA director. “The question is how many months and years will it take to mend the damage already brought to U.S. producers? The answer matters to farmers and lenders.”

Bardole, who grows soybeans and corn in southeastern Greene County near Rippey, is confident in the quality of what he grows and the demand for it.

“Our soybeans work really well in a wide range of species and that puts us in a good position,” he said. “We’ve always been the supplier of first choice for China because of price and quality. Combined, we deliver a great return on investment for pig, poultry and fish producers.”

But tariffs place an artificial barrier between him and the markets he needs to be profitable.

“When it’s about cost per pound of meat produced, the soybeans I grow can match or exceed any plant protein source in the world,” Bardole said. “But all the growth and demand numbers and forecasts in the world won’t translate to your bottom line if you can’t make sales.”

Listen to more insights from Xiaoping on our SoundCloud. 

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Contact Aaron Putze at aputze@iasoybeans.com.

For media inquiries, please contact Katie Johnson, ISA Public Relations Manager at kjohnson@iasoybeans.com or Aaron Putze, ISA Communications Director at aputze@iasoybeans.com

For permission to republish articles or to request high-res photos contact Aaron Putze at aputze@iasoybeans.com. Iowa Soybean Association | 1255 SW Prairie Trail Pkwy | Ankeny | IA | 50023 | US

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