By Karen Braun

NAPERVILLE (Ill.) – China seems to have significantly throttled soybean imports in this year. This is after a record harvest last year that coincided with a significant restoration of China’s hog herd.

China’s first quarter 2022 pork output grew to its highest level in three years. This helped to fill the gap in protein left behind by African swine flu (ASF). ASF had decimated a large portion of the hogherd several years back.

However, a pullback could occur if feed prices remain high. This is especially true since Chinese hog farmers may have to kill animals after a prolonged period of loss. This could lead to a further drop in soybean demand which has been sluggish this year.

China is expected to import nearly 100,000,000 tonnes of soybeans this year, according to the U.S. Department of Agriculture. This compares with 91 million tonnes in China in 2003-04. This would be the second consecutive year since 2003-04 when imports have fallen. The other was 2018-19, which saw a decline in demand due to ASF and U.S. Trade War.

However, this outlook conflicts with China’s official statement that soybean imports in 2021-22 will reach a record high of 102 million tonnes. This estimation has not been changed from mid-2021 to 102 million tonnes, even though USDA initially set the target of 103million tonnes for 2021-22 about a year ago.

China is the largest producer of meat, with more than 90%. The USDA predicts that the country will consume a record amount of meat by 2022 following a drastic fall in meat consumption three years ago. Although production has fallen to the lowest levels since the pre-ASF era, the remainder of supply will be met with significantly higher imports than they were in the pre-ASF era.

Lower soybean imports indicate higher hog production. This could lead to an increase in meat exports. But, import reductions of both raw and finished products might not be possible without large-scale shifts in demand.

The most notable shift in Chinese consumer tastes is their growing preference for beef from America. China purchased almost three-fold more U.S. beef than pork in 2022 shipment as of mid April, despite the fact that beef costs nearly three times more.

China still prefers pork as the protein of choice. It is expected to consume 69% more meat this year than beef. Officials in China said that pork producers will likely be back to profit by the third quarter of 2012. However, this was based on the assumption that feed prices would improve by that time.

GRAPHIC: China soybean imports https://fingfx.thomsonreuters.com/gfx/ce/lbpgnygqzvq/cn_imp_soy_21Apr22.png

SOYBEAN DIP

The government’s instruction and the cost of soy meal have caused hog farmers in Australia to decrease soybean rations.

In February, Beijing claimed that it could decrease soybean consumption by 30% using lower protein livestock diets. This is a possible attempt to reduce import dependence, but could pose risks to meat production.

China’s increasing imports of wheat, corn and sorghum could encourage some feed ingredient switching. Beijing earlier this month stated that the high corn prices as well as negative margins in hog production were depressing corn demand.

Poor crush margins in China are not only a problem for import volumes, but soybeans have been reduced and their prices have increased. Brazil, the country’s top exporter, saw its crop fall by 20 million tonnes. But China’s imports of lighter soybeans had been in place before Brazil’s difficulties.

Imports of soybeans in the first half (2021-22) (October-March), were nearly 9% lower than the high last year. The reason was a 28% drop in U.S. shipping to China from September through February. USDA has assumed that the full year will see a decline in imports for this first half.

The fact that China is releasing soybeans from their state reserves has provided a positive sign for soybean exporters in Brazil and the U.S. It is unknown what China’s actual stockpile looks like, though a decrease in reserve may require another round of reloading.

Another positive news for U.S. growers is the fact that China has secured record volumes of its upcoming crop. This does not necessarily mean more buying will occur later in the calendar year, when book activity is at its highest.

Karen Braun, a market analyst with Reuters is the author of these views.