By Lin Tan
DTN China Correspondent
BEIJING (DTN) -- China's domestic soybean production and its use of soybeans for food are converging, and it's getting tough for soybean crushers to find domestic, non-GMO soybeans to meet the need.
"Food consumption of soybeans is close to 10 million metric tons (367 million bushels)," said Zhonghua Wang, an analyst in Beijing. "Domestic soybean output is getting close to this volume, and that means almost all domestic soybeans will go to food processing and it will be hard for the crushing industry to find any domestic beans to process."
China's expected to produce 12.5 mmt of soybeans, all of which are non-GMO varieties. Acreage keeps declining after years of failed policies and competition from cheaper imports. If the trend continues, China may need to import more non-GM soybeans to avoid a short supply.
"We used to plant 24.7 million acres of soybean in the early 1960s. The acreage decreased to 16.6 million before China's economic reform in 1976," said Dr. Guanghui Xie, a professor at China's Agricultural University. "Farmers tried to plant more soybeans after economic reform, but it didn't increase much because we did not have extra land to use."
China became a net importer in 1996, and the government tried to reverse the trend by starting its "soybean promotion project" in 2002. The program's goal was to boost acreage to 24.7 ma and production to 20 mmt (735 mb) in three years and hopefully limit imports to 10 mmt (367 mb).
Xie said China was unable to meet that goal, and in some ways, had opposite results. It fell short of production targets -- in 2005 China planted 23.7 ma and harvested only 17.4 mmt (639 mb). "In the meantime, soybean imports increased to 29 mmt (1.065 billion bushels) in 2005, about double the 13.8 mmt (508 mb) import volume in 2002."
In the years following, China's soybean production kept decreasing while imports kept increasing, yet food consumption of soybeans grew from around 7 mmt (257 mb) in 2002 to 10 mmt today, Wang said.
CRUSHERS, FOOD PROCESSORS BATTLE FOR BEANS
China's regulations require all imported GM beans to go directly to soybean crushing plants and be crushed into meal and oil. Food processors are only allowed to use domestic non-GM soybeans or imported food-grade soybeans.
Wang's research shows that those rules aren't always followed. "Our survey shows more than 30% of soybeans consumed in the food industry were imported GMO beans."
While food processors are using imported GM soybeans illegally and secretly in their raw material, crushing industries have started to produce and promote non-GM soybean oil because it carries a hefty premium, cutting into food processors' supplies.
Very high-end non-GM soybean oil sells for 80 times the price of conventional soybean oil. The premium is usually not that large, Wang said, but it's enough to drive demand for non-GM soybeans.
"If all domestic soybeans are used for food processing, crushing companies have to be totally dependent on imported soybeans," Xie said. "This may be good for Chinese farmers, as they may be able to decouple their soybean price from international market, and make a good profit of their soybeans."
With crushers and food processors vying for the same small supply, it will eventually cause a shortage of non-GM soybeans in China, Xie said.
"It is not new for some of the food processors to use imported GMO soybean in their production, though it is illegal," said Xiaoping Zhang, director of the U.S. Soybean Export Council in Beijing. "If the government enforces the practice of the GMO regulation, there will be more import demand for non-GMO soybeans in China, both for food processing and crushing."
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