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Soybean industry in crisis

By Wang Jiamei (Global Times)

08:07, May 08, 2012

The difficulty in sourcing local soybean supplies is seriously jeopardizing the soybean oil processing industry in Heilongjiang Province, and industry insiders said yesterday that State subsidies are urgently needed to support the soybean industry.

"At least 80 percent of the 147 major oil mills in the province have suspended their production mainly due to the lack of raw materials," Wang Xiaoyu, vice secretary-general of Heilongjiang Soybean Association, told the Global Times yesterday.

"And because of the relatively high transportation costs, the mills cannot make purchases of imported soybeans," Wang said.

Song Shengbin, chairman of Heilongjiang Longjiangfu Grain (Industrial) Group Co, shared Wang's view, though his company has managed to stay in operation.

"This year's soybean supply seems tighter compared with the previous year. Local soybeans will likely be out of supply in one or two months, and at that time, we will have to wait for the supply from the State Bureau of Grain Reserve," Song told the Global Times yesterday.

According to data from dadou.cn, a soybean information provider, the soybean growing acreage in Heilongjiang Province, China's main soybean production base, has been declining continuously in recent years, with a 30 percent year-on-year drop expected this year.

"Farmers have gradually shifted to corn production due to lower returns from soybean farming," Wang said.

The dominance of foreign companies in raw material and finished product markets in China leaves little room for Chinese farmers and oil mills to bargain over prices. With a complete industrial chain and better cost control, foreign companies operating in China are able to set prices at relatively low levels for their imports, Wang explained.

China's soybean imports have been climbing rapidly in recent years. Customs statistics show that the country imported 30.82 million tons of soybean in 2007, 42.54 million tons in 2009 and 52.64 million tons in 2011. The number jumped 21.6 percent year-on-year to 13.33 million tons in the first quarter of 2012, taking the country's foreign reliance to up to 80 percent.

According to the Heilongjiang Soybean Association, the consumption of soybean oil produced by domestic companies only accounts for about 10 percent of the total consumption in the Chinese market currently.

"Foreign edible oil producers have already established complete and well-developed soybean oil processing industry chains in China. Even if the price of imported soybeans is higher than the domestic ones, these producers can make up for the loss with the profit from processing," Wang noted.

"As a processor, we hope the government can give more subsidies to farmers to encourage soybean farming," Song said.

Currently, there is no separate subsidy for soybeans, so soybean farmers receive the same subsidies, about 1,050 yuan ($166.44) per hectare, as for common crops like corn and rice, according to Wang.

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