China to Restrict Soybean Imports

China is expected to curb imports from one of its largest soybean suppliers, Argentina, in a bid to save the domestic soybean industry, trade representatives from a meeting with the government said Wednesday.

They did not say if soybeans from the United States, another major supplier, would be subject to any restrictions.

Argentine soybean oil imports with residual solvents of more than 100 parts per million (ppm) will be barred from the Chinese market as of Thursday, according to heads of domestic grain and oil giants attending a briefing given by the China Chamber of Commerce of Import and Export of Foodstuffs, Native Produce and Animal By-Products, which is affiliated with the Ministry of Commerce.

The move is to help domestic producers and in retaliation against Argentina, which has launched anti-dumping measures on goods from China, including tableware and textile threads, Bloomberg quoted the trade group's vice chairman, Bian Zhenhu, as saying.

Soybeans are generally treated as an oil crop in China, not classified as grain, whose domestic production is under special protection for national security reasons. The latest measure on imported soybean oil came amid years-long concern that domestic soybean production in China, the world's largest soybean oil consumer, is under threat from imported soybeans.

China went from a major soybean producer to the largest soybean importer in 2002 when it abolished an import quota and tariff on soybeans. China consumes 40 million tons of soybeans annually. As much as 70 percent of China's edible oil market depends on imports from major soybean producers in the world, including the US, Argentina and Brazil.

The China National Grain and Oil Information Center reported China's 2009 imports of soybeans were about 42.5 million tons, up 13.5 percent from a year earlier. However, production of domestic soybeans is around 16 million tons.

Heilongjiang Province is a major soybean production base in China. Wang Xiaoyu, vice secretary general of Heilongjiang Soybean Association, told the Global

Times that the dominance of foreign soybean-oil suppliers in the Chinese market makes it harder for Chinese soybean farmers to survive.

The Agriculture Commission of Heilongjiang Province announced recently that the planting area for soybeans in the province is expected to reach 65 million mu (10.6 million acres), down 5.6 million from a year earlier.

Most imports are genetically modified (GM) soybeans, which are cheaper than non-GM soybeans and can have higher yields, and GM soybean s are eating up the share of domestic non-GM soybean.

Imported soybeans are priced at 3,300 yuan ($483) per ton, while domestic ones are priced at 3,700 yuan ($541). Domestic oil refineries have to bear the economic losses if using domestic soybeans.

"The lower price, pushed down by excessive imports, dampens farmers' incentive to plant soybeans," Wang said. "To make it worse, the government's procuring procedures are often so complicated that farmers find it hard to find an effective channel to sell their produce."

He said he wished the government could reduce soybean imports in the harvest season from October to April.

Zhao Guangyi, a soybean farmer in Yichun, Heilongjiang Province, told the Global Times that he could only make between 10,000 yuan ($1,464) and 12,000 yuan ($1,757) a year by planting soybean due to the complicated procurement procedures and low price.

The current government procurement price for soybeans is approximately 3.74 yuan ($0.54) per kilogram, while the cost for planting soybeans can reach 3.4 yuan ($0.49) per kilogram, according to Zhao.

Foreign capital manipulation of China's soybean market can be traced back to 2004 when soybean prices were driven to as high as 4,300 yuan ($629) per ton by futures trading speculators on hearing the news that China's purchase mission was expected to buy 2.5 million tons of soybeans.

Less than one month after the mission finished purchasing, the prices of soybeans dropped to 3,100 yuan per ton. About 50 percent of Chinese oil refineries closed after incurring huge losses. As a result, some 70 percent of Chinese oil refineries are under the control of international companies.

Apart from massive imports of soybeans, foreign genetically modified seed imports also raise concern among ecologists and experts.

Experts have long called for measures to deal with the current situation.

Zhang Xiaoping, vice representative of the American Soybean Association Beijing Office, told the Global Times that if the Chinese government imposes restrictions on soybean imports it could damage the interest of US soybean farmers and the whole soybean industry in China in the long term.

Si Wei, an associate professor at the College of Economic and Management at China Agricultural University, told the Global Times that it is impossible for the Chinese government to impose direct restrictions on soybean importss as it is against WTO rules. But the quality issue is another matter.

The government is facing a dilemma as to whether to protect Chinese soybean farmers or continue to import large quantities of GM soybeans from abroad, he said.

"Currently, China has to import soybeans because its own production can't meet the demand. But the bottom line is how much China should import," he said.

China should have a clear policy plan and goal on what self-sufficiency rate of soybean China should maintain so that the soybean market won't spiral out of control, he added.

As well as imports, China's domestic soybean oil manufacturing is also largely under the control of international oil giants. About 75 percent of the total market share has been controlled by US-based Archer Daniels Midland (ADM), Cargill, Holland-based Bunge, and France-based Louis Dreyfus since 2004.

The State Council is expected to release a guideline for the oil industry in the first half of this year. Under the guideline, 60 percent of edible oil must be self-made by 2020, Economic Observer News reported Friday.