March 22, 2013 (BEIJING, CHINA) – As 27 Minnesota soybean farmers and spouses (including myself) continue our 10-day trade mission trek across eastern China, we spent valuable time Thursday with Paul Burke, North Asia Regional Director of USSEC (United States Soybean Export Council) as part of the MSR&PC International Marketing 'See For Yourself' program.
Burke, through his work with USSEC, represents almost 500,000 U.S. soybean farmers here in north Asia (China, Japan, Taiwan and Korea). Those four markets represent 70% of U.S. soybean exports.
He gave an overview of soybean consumption trends in China – from crushing to food use to domestic production. Crush has grown an amazing amount in China since 2000, where more of it is used for meal than oil, since China is the largest importer of soy oil in the world. For example, this year China is taking 25% of all U.S. soy oil.
Soy meal clearly drives the crush here. Thanks to the hard work of many people backed by a good soybean checkoff investment, it opened doors for greater feed inclusion by soybeans and corn. Soy meal inclusion is now 14% of the feed ration.
China crush capacity is 120 million metric tons. It only imports 63 mmt, so 50% of its crush capacity is underutilized. A lot of new crush investment has occurred in China, and it's now the most modern crushing industry in the world. A 1,000-ton/day plant is too small and uncompetitive. They believe you must have a 3,000-ton/day plant just to be competitive. COFCO, one of largest state-owned enterprises, can crush 12,000 tons/day in three plants in one place along a major river. By comparison, the big plants in the U.S. crush 1,000-1,200 tons/day.
There are approximately 20 soy crush groups in China, a very diversified group. The biggest growth sector is the state-owned enterprises – Yihai-Kerry, COFCO, Jiusan and Chinatex, to name a few. Reason for such growth is that the Chinese government was concerned back in the mid-2000s about large multinational control of the crushing industry, so the government denied their requests to expand.
Chinese Soybean Production, Consumption
China soybean production is slowing down, but it is still currently the fourth largest producer in the world. And it is a highly emotional issue here. China doesn’t want to lose its soy industry because it is the sole supply of food-grade soybeans that they eat. Case in point, in 1993, soy food consumption was about 5 mmt, and now it’s around 12 mmt. And as diets improve here, this continues to be a growing market. The Chinese consume both more meat protein and more soy foods.
Korean, Japanese and Taiwanese consumption is all flat, but China is growing. Soy food products are a staple eaten every day. Soy milk, for example, is consumed by vast amounts of people every morning. Lunch and dinner you've got tofu in the dishes, with soy sauce, and soy paste is used for flavoring – all eaten every day.
The fact that all soy food is labeled non-GMO, Burke believes that eventually China consumers will become more like the consumers in Taiwan, which allows GMO crops, using labels to price points. When a consumer sees a tofu that is lower priced, labeled as GMO, compared to high prices for non-GMO, he believes they will be willing to buy a lower-priced product. Taiwan allows GMO foods priced more cheaply than non-GMO products, and all are labeled.
Exporting to China
Burke doesn't see soy exports leveling off for a long time. A large trading company recently reported Chinese pork consumption per capital is half of what it is in Hong Kong and Taiwan. He sees another 20 years of growth in the feed industry. The government wants to move another 20-30% of people into cities. Urbanization is predicted to peak out by 2026, but diets will continue to demand more protein.
Regarding exports to China, Burke says the U.S. is currently at 42% market share with China for soybeans, and he thinks that's good. We produce about 32% of total global soybean production. With South American competition shrinking some years, we are now a 12-month supplier to China instead of the four to six months in the past due to Chinese needs for soybeans year around. And if Chinese and Mexican demand goes the way it's going, we're going to have the tightest stocks we've ever had, he adds.
Burke concluded his talk with comments on a new market. By 2016, the U.S. has declared it will export food-grade non-GMO soybeans to China on a significant scale. North Dakota food-grade soybean growers are currently meeting in Beijing to promote their capabilities. Why? The national dietary recommendation for total per capita consumption of soy is currently 7 kg, and they want to get it to 10 kg and higher. What that means is 13.6 mmt of food-grade soy products are needed. China only produces 12 mmt, so that means there's more than 1-mmt potential.
Read more about the trade trip to China!