China wants to reduce reliance on foreign soybeans, but importers apparently didn’t get the memo.
To curb imports and increase national food security, the world’s top soybean buyer in recent years says it has made sizable cuts to soybean meal’s use in livestock feed.
However, China’s soybean imports were at a record high last year, raising questions about the implementation of feed reformulation efforts.
China takes in at least 100 million metric tons of soybeans per year. Nearly all of them are processed into a protein-rich feed ingredient predominantly for the country’s hog herd, the world’s largest.
Beijing on Tuesday said it aims to cut soybean meal use in animal feed to 10% by 2030 versus 13% in 2023 and 18% in 2017.
In theory, this news should be most alarming to Brazil, whose soy industry boom has been largely fueled by Chinese demand growth. On the other hand, U.S. bean producers may be less shocked as they have become accustomed to Chinese rejection in recent years.
China’s annual soybean haul has grown at a slower rate than was perhaps envisioned a decade ago, and the country’s hog herd has stagnated amid poor profits in recent years.
But China still relies heavily on foreign soy supplies, and importers are expecting record intake between April and June with the arrival of Brazil’s monster crop.
LESS FEED, MORE IMPORTS?
China’s ongoing plan to reduce meal in feed has been periodically reported since at least 2018. At that time, Chinese hogs typically ate a recipe containing about 20% soymeal and 70-75% corn, according to Reuters data.
A 2022 Chinese ministry report said soymeal’s feed share dropped to 15.3% in 2021 from 17.8% in 2017, a bit lower than the 2018 Reuters figures.
That saved a cumulative 11 million metric tons of soybean meal, equivalent to about 14 million tons of soybeans, according to the ministry.
In April 2023, Beijing proposed a sub-13% rate for 2025. Analysts at the time surmised this could cut soybean imports to 82 million tons by 2025, well below China’s current 2024-25 estimate of 94.6 million.
The U.S. Department of Agriculture pegs China’s 2024-25 soybean imports much higher at 109 million tons, providing possible evidence that China is understating meal use.
USDA last year began using global exporters’ data to estimate Chinese soybean demand instead of Chinese customs data because the shipment figures far outweighed China’s reported intake.
USDA’s 109-million-ton import target for 2024-25 compares with 94.1 million in 2017-18.
It is possible that China is accumulating excess soybeans to pad state stockpiles. China usually prefers U.S. beans for its reserves since they store better than the higher-moisture Brazilian offering.
PORK PLATEAU
China’s hog situation is not screaming for more soybeans, but it is not necessarily calling for less, yet. USDA’s headcount for China’s 2025 hog herd is identical to the 2017 figure.
Between 2019 and 2021, cumulative pork production fell by more than 20% due to a one-two punch of hog disease and the global pandemic, explaining reduced soybean imports during that time.
Otherwise, China’s pork production has drifted only slightly higher over the last decade, reflecting poor profitability in the hog sector as well as consumers’ shifting demand for alternative protein sources.
A stall-out in pork consumption could be problematic for both Chinese hog producers and Brazilian soy growers. Oversupply and slow demand have been weighing on prices and profits in the sector, despite a recent uptick in production.
But the tipping point could be near as China’s pork demand may have reached maximum capacity.
China’s economic growth has slowed and that is expected to persist for at least the next couple of years, potentially creating a more noticeable impact on global soybean trade than the dwindling meal rations.
Source: Reuters
