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Increasing Soybean Imports Trigger off Worries About Grain Security

The National Development and Reform Commission (NDRC), China's top economic planning agency, has decided to prolong implementation of interim import duty on soybeans from March 31 to September 30, a NDRC source confirmed Thursday.

To reduce the cost of soybean imports and curb price rises for grain on the domestic market, on October 1, 2007 China slashed import duty on soybeans from three percent to one percent.

The country's consumer price index, a barometer of inflation, jumped to an 11-year high of 7.1 percent in January on the back of rocketing food prices.

As the aforesaid move pointed to more soybean arrivals, however, the increasing reliance on imports of this sort of foodstuffs has triggered off worries about China's grain security.

Before 1995, China had been a major producer and net exporter of soybeans. But it became a net importer in the five years thereafter. In 2000, the country bought approximately 10 million tons of soybeans from abroad, an equivalent to 177 percent of the annual production at home. Since then, soybean imports kept increasing and, in 2006 the volume reached 28.27 million tons, and in 2007 it was estimated at 31 million tons.

According to Liu Chaoyang, an analyst with the Southern Fund Management Co. Ltd., taking into account imported edible oil made from soybeans, China's gross soybean imports were estimated at 50 million tons or so.

Such big imports helped reduce China's grain self-sufficiency to 90 percent, which was already lower than the government-set ratio of 95 percent. In other words, substantial soybean imports tend to threaten China's grain security, Liu commented.

Worse, China National Grain and Oil Information Center estimated soybean production nationwide at 14 million tons for 2007, down 12.32 percent from the previous year. The center said areas sown with soybeans shrank 6.25 percent, which would point to more imports.

The reason why China's domestic soybean output declined drastically lay in the impact from genetically modified produce from abroad.

In comparison with genetically modified produce, China's soybeans suffer from disadvantage in cost. The oil extraction ratio of domestically-yielded soybeans is only 17 percent to 18 percent, whereas that of imported soybeans is 22 percent or so.

Along with an improvement in diet structure, soybean is playing an increasingly important role in foodstuffs.

China's edible oil imports soared more than 200 times from the 1986 level, and imports amounted to 8.38 million tons in 2007. Most of the imports were made from soybeans. On the basis of a 20-percent oil extraction ratio, soybean oil imports will translate into an increase of 45 percent to the soybean imports, according to Wan Xiaoxi, another analyst with the Southern Fund Management Co., Ltd.

Industry insiders have already begun to describe the situation as a "soybean crisis." The description might become more sensational when it came to the monopoly of soybean processing sector by foreign-funded companies.

State media reported earlier that 70 percent of China's edible oil plants were invested in by foreigners and that 80 percent of soybean extraction capacities nationwide were controlled by foreign-invested companies.

The foreign monopoly has weakened the Chinese government's capabilities of regulating the foodstuff market at home.

Besides, the high dependence on imports made the domestic grain market more vulnerable to volatility of grain prices abroad, Liu pointed out.

On November 22, 2007 the International Grains Council estimated that grain stockpiles worldwide had reduced to a 30-year low of 255 million tons, which was ready to spur price rises.

Given the high reliance on imports, experts suggested that the Chinese government should keep a soybean stockpile of at least one year's consumption, i.e. 50 million tons. Meanwhile, more than five million tons of edible oil should be in stock. Futures market should be made use of to hedge price fluctuations on global grain markets.

(Xinhua News Agency March 7, 2008)


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