China’s soybean crop in 2014-15 is 1% smaller than last year’s crop at 12.45 million metric tons (457 million bushels) compared to last year’s 12.56 mmt (462 mb) crop, a recent survey shows.
China’s domestic soybean production has been trending downward for years, but this year’s crop is actually larger than many expected thanks to good growing conditions in northeast China, the country’s top soybean production area.
“We were expecting a much lower output in the summer time because of the decrease in planted acreage and drought conditions in middle China,” said Zhonghua Wang, an analyst in Beijing. Wang’s output estimation was 9.6 mmt (325 mb) earlier this year.
In its November report, USDA estimated that China will produce 11.8 mmt (433 mb) of soybeans.
China’s soybean acreage declined 9% year over year to 17.7 million acres, the lowest since 1992. Last year Chinese farmers planted 19.5 million acres. The most China ever planted was 23.7 million acres in 2004.
“The lower planting acreage was due to competition from corn and rice,” Wang said. “Last year’s profit for soybean production in Heilongjiang Province, China’s largest soybean producing region, was around $251 per acre, while the profits for corn and rice are as high as $484 and $680 per acre.”
According to Agricultural Bureau of Heilongjiang Province, soybean acreage in the province decreased from 9.9 million acres in 2009, to 8.4 million acres in 2011, to 6.6 million acres in 2012, and to 5.4 million acres this year.
“Optimal weather in northeast China helped the yield this year,” Wang said. “Most of the yields in the area increased 10% to 30% compared to last year. Good yield offset the acreage decrease.”
Policy changes and cheaper prices on imported soybeans are also encouraging China’s acreage decline, Wang said.
“The government abandoned the floor price purchase program this year and changed to a new policy of a target price subsidy. The uncertainty of the government policy has discouraged farmers from planting soybeans,” Wang said.
The government announced a target price of $21.07 per bushel earlier this year, but the details of the policy, like whether the subsidy will be based on production or acreage and how the government plans to allocate the subsidy, haven’t been released.
Soybean processors are waiting to see what the government will do under the new policy. They’re also watching how prices respond to harvest.
Current local price is lower than the government target price, and Wang expects it keep falling.
“We saw the price getting lower to $20.19 per bushel at the beginning of November,” he said. “This should go even lower because of cheaper U.S. soybean imports. The current price of soybeans imported from the U.S. is only $15.62 per bushels.”
Wang said he believes China’s soybean acreage will decline again next year and the industry will be more dependent on imported soybeans.