Genetically modified (GM) soybean imports have been nibbling away at China's soybean market for years. Now northeast China's Heilongjiang Province is being particularly hard hit.

Heilongjiang used to produce high-quality soybeans, with farmers selling more than 60 percent of their crop before the Spring Festival but less than 2 percent of soybeans have been sold so far this year.

Instead, the lower priced GM soybeans are taking control of the market.

"The low price is killing my factory. Our business won't work this way," said Zhang Enzhi, owner of an oil refinery that stopped production a week ago.

According to China News Service, the disparity in price has forced 68 medium-sized soybean-processing enterprises in Heilongjiang to stop production.

Despite the Chinese government's efforts, GM oil still takes more than 80 percent of the market, said an industry insider.

In 2004, international tycoons made use of futures trading to drive soybean prices up to 4,300 yuan (US$630) per ton. In fear of further price rises, Chinese oil refinery enterprises bought 3 million tons of soybeans from the United States.

Later on, the price of soybean fell to 3,100 yuan per ton, resulting in the closure of 50 percent of Chinese oil refineries. International companies then took 60 percent of Chinese oil refinery companies under their control.

In 2005, they aimed for non-GM soybean refinery companies. International companies purchased China's non-genetically modified soybean-oil at a high price and sold them out at a price even cheaper than GM oil.

"Our non-genetically modified soybean-oil deserves a good price. But the international companies have dropped the purchase price for evil purposes," Tian Renli, president and general manager of Jiusan Oil and Fat Company, one of China's top 500 enterprises, was quoted as saying by China News Service.

In 2005, non-GM oil sold at 35 yuan a barrel in supermarkets, while GM oil sold at 56 yuan, Tian said.

This was a vital strike to China's non-GM oil refinery companies. Till 2006, half of northeast China's oil refinery plants were either shut down or out of business.

Since planting GM soybeans for commercial use is still at the discussion phase, non-GM oil producers are crucial for Chinese soybean farmers.

By the end of 2008, the General Administration of Customs warned that foreign capital is sharpening its control of food production, especially in terms of non-GM soybeans.

Since then, Chinese government has practiced the protective purchasing price system. China Grain Reserve Corporation (CGRC) bought 7.25 million tons of soybeans in Northeast China at a price of 3.7 yuan per kg between October 2008 and June 2009.

"But the aid can only scratch the surface," said Wang Defu, a bean farmer in Heilongjiang.

According to Wang, since CGRC only buys top-quality beans, government policies can't save farmers from losing money.

So many farmers prefer not to sell their soybeans due to the low price.

"If this continues, it will frustrate the farmers. And the soybean planting area is likely to reduce by several hundred mu this year," Wu Liqiang, the deputy Secretary-General of the Heilongjiang Soybean Association, told the China Economic Weekly.

(China Daily February 12, 2010)