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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed

09 March 2012

USDA GAIN: China Oilseeds & Products Annual 2012USDA GAIN: China Oilseeds & Products Annual 2012

MY12/13 total oilseed production is forecast at 56 million metric tons (MMT), a slight adjustment of one percent from last year's estimated 56.6 MMT. Total oilseed demand will stay strong, particularly for soybeans, with MY12/13 consumption forecast at 118 MMT up from an estimated 113.6 MMT in MY11/12. Consumer affluence will drive soybean imports to 59 MMT in MY12/13 to meet increasing demand for animal products and vegetable oils.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Total MY12/13 oilseed production is forecast at 56 million metric tons (MMT) from a planted area of 25.7 million hectares (MHa), both down 0.7 percent and one percent from MY11/12, respectively. Rising consumer affluence is driving demand for animal and fish protein. In response, advancements in concentrated animal and aquatic production, growth in the feed industry and expansion in the crush sector are spurring demand and need for imports to supply feed protein sources, such as soybean and rapeseed meal. Total oilseed imports in MY12/13 are forecast to reach 60.9 MMT from 57.5 MMT in MY11/12.

Oilseeds Situation and Outlook

China is the world’s largest oilseed consumer. Population growth and dietary demands overwhelm stagnant domestic production capabilities, leaving China dependent on foreign suppliers, particularly the U.S., Brazil and Argentina, to meet its supply gap.

Total Oilseeds

Total MY12/13 oilseed production is forecast at 56 MMT, down one percent in planted area to 25.7 million hectares (MHa), as cottonseed falls one MMT in response to diminished cotton returns.Positive soybean returns in MY11/12 are generating moderate growth expectations in MY12/13 soybean planting area and raising the production forecast to 13.7 MMT. Likewise, relatively high prices for rapeseed products in late 2011 will spur production to 12.8 MMT based on a planted area of 7.2 MHa. A sharp decline in MY11/12 cotton profits, however, will cause a 10 percent decline in cotton planted area and one MMT drop in cottonseed production. MY12/13 peanut production is forecast slightly lower at 16 MMT from a record high 16.2 MMT in MY11/12.

Potential expansion of oilseed production through land area or yield improvements remains limited. Government incentives draw arable land toward more profitable competing crops like corn and rice. Additional yield gains for oilseeds are hindered by poor agronomic practices, insufficient technology, and inadequate farmer inputs.

Soybeans Production

Soybean production in MY12/13 is forecast to increase to 13.7 MMT from the previous year’s estimated 13.5 MMT in response to favorable returns. Total soybean planted area in MY12/13 is forecast to rise slightly to 7.7 MHa from 7.65 MHa in MY11/12, per China’s National Grain and Oils Information Center (CNGOIC). This rise represents a modest recovery from a MY11/12 drop in planting area and production after unfavorable weather and low returns in MY10/11 drove farmers to plant more corn versus soybeans.In major production regions, particularly Heilongjiang where corn, rice and soybeans are planting options, soybeans are the least profitable crop. Industry sources estimate Heilongjiang province added almost 1 MHa of corn and rice area in MY11/12 to the detriment of soybean planting area which fell to 3.46 MHa from 4.5 MHa in MY10/11. The National Statistics Bureau, however, released a much lower MY10/11 planted area at 3.55 MHa.

The national average for soybean yield has remained constant at 1.7MT/Ha for several years (excluding an MY09/10 abnormal weather disruption in NE China.) Small-scale farm size, lack of agronomic techniques, such as soybean crop rotation, and limited access to better inputs remain major impediments to yield increases, factors which are unlikely to change in the near future. Significant production gains from area increases are also unlikely given soybeans modest profit signals, lucrative alternative crops and land constraints.

According to an industry survey, MY11/12 soybean profits were impacted by an average 30 percent increase in overall production costs which whittled modest price gains. National and Heilongjiang soybean prices tracked closely with the yearly price spread rising at harvest but closing and ending the year at nearly the same price.

Based on CNGOIC, the December wholesale price for soybean oil and meal declined by 15 and 16 percent from January, respectively. Furthermore, China’s soybean crushing sector experienced the longest “negative crushing margin” in 2011. (See chart 2 - Exchange rate in 2011: RMB6.5 =$1.0). The Chinese government’s food security policy dictates that domestic soybeans, considered a staple grain, maintain their production level. Thus, the government provides income support through a floor price purchase price program which is expected to help stabilize soybean planting area in the major production areas in the northeast. Although 2012 planting decisions aren’t yet firm, industry sources relate that the northeast provinces are expected to moderately increase planting area and other producing provinces area will likely remain stable.


MY12/13 rapeseed production is forecast at 12.8 MMT based on a planted area of 7.2 MHa, up two percent from the estimated 12.5 MMT from planted area of 7.1 MHa in MY11/12. The rise in production forecast for MY12/13 is based on slightly improved profits in MY11/12. The average purchase price for rapeseed was estimated at RMB4,700/MT, up 20 percent over the previous year. However, the migration of farm labor to city work has reduced the labor supply and raised production costs for rapeseed.

To encourage the maintenance of rapeseed planting area, the GOC provides a rapeseed seed subsidy of RBM150/Ha. Industry insiders argue a higher subsidy would encourage farmers to make more use of idle winter idle for rapeseed at a time when competition for land with grain crops is not an issue. To bolster farmer’s income, the Government also provides income support through its purchase of rapeseed for state reserve at a floor price. According to industry sources, the GOC was to purchase 2 MMT of MY11/12 rapeseed at the floor price (RMB4,600/MT), up 16 percent over the previous year between late June and the end of September 2011, however, no specific volume purchases have been made public.

Based on a MOA’s survey at the end of 2011, winter rapeseed planted area had increased moderately, though no specific data was released, with the percentage of “first grade plants” in Hunan up by 15 percent and Jiangxi Provinces up nine percent, respectively, over the previous year. Spring rapeseed area in the northwest provinces is also expected to increase.CNGOIC estimated that current domestic rapeseed crushing capacity at 40 MMT, with a utilization rate of less than 40 percent. COFCO estimates rapeseed crushing capacity at 36 MMT. Underutilized crush capacity will continue to boost the demand for rapeseed imports which are forecast for MY12/13 at 1.8 MMT, up from the estimated 1.6 MMT in MY11/12. China’s policy on rapeseed imports, which requires entry only in non-rapeseed producing regions due to phytosanitary concerns, continues unchanged. This policy primarily affects Canada and Australia.

In 2011, COFCO’s opened three new rapeseed crushing facilities (in Hubei and Anhui) and another four (in Fujian, Guangxi, Jiangsu and Hubei) were added by other companies. The new rapeseed crushing facilities, located in non-rapeseed producing region including Fujian and Guangxi, have expedited imports of rapeseed with about 600,000 MT imports for the first quarter of MY11/12.

Soybean Meal


SBM production in MY12/13 is forecast at 50.3 MMT, up 8.6 percent from the estimated 46.3 MMT in MY11/12. As other protein meal production remains stable and imports of protein meals are constrained by limited resources at high prices (for fish meal) and relatively lower value (for rapeseed meal), SBM remains the best choice for industry feed production and increasingly concentrated animal producton. With the excessive soybean crushing capacity using growing imports of soybeans, domestic SBM production is expected to continue to be high with adequate supply to meet the market demand in MY12/13 and beyond. The current relatively low SBM price (See Table -23) is expected to drive a steady growth of SBM consumption in MY11/12.


SBM trade is expected to decline in MY12/13 with exports forecast at 600,000 MT and imports at 100,000 MT. SBM trade remained insignificant in recent years because large domestic SBM production and consumption dominates the market. Japan remains the largest market, accounting for 65 percent of China 345,000 MT SBM exports in MY10/11. Industry analysts expect sporadic imports and exports of SBM as traders take advantage of regional or local price differences and exports of non-biotech SBM. SBM imports will remain insignificant as they are less competitive compared to the excessive domestic soybean crushing sector.

The GOC suspended imports of SBM from India beginning in early 2012 reflecting the GOC’s preference for domestically crushed oilseed meals in lieu of other inexpensive priced meals.

Rapeseed Meal

Post forecast MY12/13 rapeseed meal imports at one MMT, similar to the estimated imports in MY11/12. China’s imports of rapeseed meal surged to above one MMT per year in MT09/10 and MY10/11 from about 240,000 MT in MY08/09. The import growth is partly boosted by increased domestic demand (while domestic production lags behind demand growth) and its price competitiveness. Additionally, the GOC’s phytosanitary restriction has reduced rapeseed imports since 2010. Lower imports of DDGS due to the uncertainty related to China’s anti-dumping investigation also attributed to the growth of rapeseed meal imports. In the long term, however, China’s excessive rapeseed crushing capacity is expected to favor rapeseed imports instead of rapeseed meal.


Fishmeal imports in MY12/13 are forecast at 1.22 MMT, up slightly from 1.2 MMT in MY11/12. Domestic fishmeal production remains low at about 220,000 MT per year. Imports in MY10/11 stood at 1.16 MMT. The current availability of SBM at affordable price is likely to hinder fish meal use. However, imports in MY12/13 are forecast to be stable given the demand by large-scale animal and aquaculture industries.

Imported fishmeal will face a new hygiene certificate. On August 23, 2010, AQSIQ informed the U.S. Embassy Beijing that Decree 118 and its Regulating Inspection and Quarantine of Import and Export Feed and Feed Additives of July 20, 2009 would go into effect at the beginning of 2011. With these measures, U.S. exports of aquatic origin protein would face import requirements that include facility registration and new hygiene and quarantine requirements. USDA and NOAA conducted consultations with the Chinese regulatory agencies and requested they continue to authorize importation of U.S.-origin fishmeal under existing protocols and requirements until a new agreement can be reached. Currently, the Chinese regulatory agency granted a transitional period for US fishmeal exports to the end of June 2012 when a bilateral consensus on this issue is scheduled to be reached. As discussions continue on this new requirement, traders should consult with importing partners for specific requirements for exporting fishmeal and fish oil to China during the period when the U.S. government is consulting with the GOC on this issue (See more in GAIN CH Fishery Annual).

Soybean Oil

The MY12/13 soybean oil production forecast is 11.35 MMT, up 8.6 percent from last year’s estimate due to increased crushing of imported soybeans. MY12/13 imports are forecast at 1.4 MMT. Soybean oil remains the dominant vegetable oil, accounting for 46 percent for domestic vegetable oil consumption in MY12/13 (Chart 9). Argentina is expected to resume its status as a major soybean oil supplier to China in MY12/13 after China lifted the import ban and traders’ confidence recovered. The GTA data show soy oil imports from Argentine in the first quarter of MY11/12 exceeded 150,000 MT, accounting for 52 percent of total imports.

Palm Oil

MY12/13 palm oil imports are forecast to increase moderately to 6.2 MMT from the estimated 6.1 MMT in MY11/12. Palm oil consumption continues to be driven by both food processing and home consumption. A price fall in late 2011 is expected to boost palm oil consumption and import growth. CNGOIC statistics indicate the December wholesale palm oil price decreased by 24 percent from January, and remained 12 percent lower than soybean oil (see Table 27). This is likely to boost imports and consumption in MY12/13.

Demand for palm oil remains strong mainly because of its cheap price relative to soybean oil and rapeseed oil. Blending palm oil with other vegetable oils and selling it as cooking oil is popular. Another factor contributing to strong demand continues to be increased demand for processed foods, especially instant noodles, which uses large amounts of palm oil. Industry sources show that instant noodle production in the first 11 months of 2011 surged to 7.5 MMT, up 22.8 percent over the previous year. Ready-to-eat noodles are popular with travelers, migrant workers, and some office workers due to their low cost and convenience. With more and more people traveling and eating outside of the home, demand for instant noodles is expected to continue rising in 2012 and beyond.

China does not produce palm oil so demand can only be met by imports. China’s close proximity to Malaysia and Indonesia gives palm oil a shipping advantage relative to other oils. According to industry sources, the 2011 palm oil production in Indonesia exceeded 23.5 MMT, up from the 22.3 MMT in 2010, while production in Malaysia in 2011 will also grew moderately to 18.3 MMT from the 17.7 MMT in 2010.

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