USDA Releases Oilseed Crops and Products Report on China Market

 

｜Report Highlights｜

 

● Affected by the multiple adverse effects of rising prices of global commodities, especially bulk agricultural products, increasing downward pressure on the domestic economy and the outbreak of the new crown epidemic, the demand for meal and vegetable oil in the Chinese market has shown a weakening tren.
Pig and poultry production and breeding companies struggled to make profits in the first half of the 21/22 market year, reducing the proportion of soybean meal in the feed, thereby reducing soybean crushing demand and import deman.

 

● Due to the impact of the COVID-19 pandemic, reduced demand for vegetable oil in the catering industry in urban areas across China, coupled with rising international vegetable oil prices, vegetable oil imports in the first seven months of the 21/22 marketing year (October 2021-May 2022) It has decreased by more than 50% compared with the same period last yea.
According to data from the General Administration of Customs of China, the import volume of edible vegetable oil in the Chinese market in the first half of 2022 was 881 million tons, a year-on-year decrease of 65.

 

● Driven by higher prices in China's domestic market and government incentives, the area planted with soybeans and other oilseed crops has expanded, and the report forecasts China's domestic soybean crop to reach 14 million metric tons in the 22/23 marketing yea.

 

● As the profitability of hog and poultry production and breeding enterprises recovers, the price competitiveness of alternative feed inputs, especially wheat, decrease.
In the 22/23 marketing year, soybean imports and consumption of soybean meal and vegetable oil are expected to reboun.
Soybean crush and imports will recover to 95 million metric tons and 98 million metric tons, respectivel.

 

● State Reserve soybean auctions continued to be held weekly, with an average auction volume of nearly 500,000 metric ton.
As of June 17, auctions had sold 4 million metric tons of soybeans, accounting for 38% of the total offered for auctio.

 

1 Analysis and prediction of soybean planting situation

 

In the 22/23 marketing year, China's soybean planting area is expected to be 35 million hectares, an increase of 11% year-on-yea.
It is mainly driven by multiple factors such as national incentive policies, market prices, input prices and subsidie.

 

Higher prices for grains and oilseed crops in 2021 have reignited calls to increase soybean capacit.
The Chinese government issued the "Opinions of the Central Committee of the Communist Party of China and the State Council on Doing a Good Job in Comprehensively Promoting the Key Work of Rural Revitalization in 2022", that is, the N.
1 Central Document in 2022, proposing to "vigorously implement the soybean and oilseed production capacity improvement project.
Local producers responded to government expansion incentives and price support by increasing plantings to boost soybean production capacit.

 

In addition, the high price of edible soybeans in the 22/23 marketing year has also inspired Chinese soybean farmers to increase their planting are.
Soybean cultivation requires less fertilizer, and farmers will also benefit from growing soybean.
In some provinces, farmers who plant soybeans in rotation will receive additional subsidies, which will also motivate and increase farmers' willingness to plan.

 

2 Analysis and forecast of soybean consumption

 

soybean crush

 

China's feed industry has seen weak demand in the 21/22 market year as the poultry and pig farming industries struggle between low and even negative margins, coupled with weakening consumer deman.
Soymeal accounts for about 76% of total feed protein meal and is expected to rebound as commercial inventories build up and prices fall relative to other feed ingredients, especially whea.
In addition, demand for crush soybeans is expected to increase due to higher vegetable oil prices, higher consumption of edible soybeans, and reduced supplies of sunflower meal for marketing year 22/23.

 

There are differences in the forecast values ​​of soybean crush in the Chinese market in the 21/22 market year and the 22/23 market year, but the industry unanimously predicts that the total use of soybean meal feed in the Chinese market in the 21/22 market year will decrease by 3% compared with the previous market yea.
to 5.

 

USDA forecasts in this report that the soybean crush in the Chinese market will be 95 million metric tons in the 22/23 marketing year, up from 92 million metric tons in the 21/22 marketing yea.
This forecast is based on expectations of a recovery in feed production and higher soybean meal usag.
In the 22/23 marketing year, the consumption of soybean meal for feed in China is expected to be 78 million metric tons, an increase of 5% from 71 million metric tons in the 21/22 marketing yea.

 

Feed demand for soybean meal

 

Growth in China's hog, poultry and aquaculture industries and its demand for protein meal for feed continue to drive demand for oilseed crushin.
In 2022, due to the excess supply of live pigs and the high input cost of superimposed feed, China's pig industry will struggl.
Feed demand from the poultry industry has also weakened in marketing year 21/22. Lower profits and weaker demand impacted total feed production for the Chinese market in 2022. According to statistics from the Ministry of Agriculture and Rural Affairs of China, the total feed production in the first five months of 2022 will be 132 million metric tons, a year-on-year decrease of 2%, of which the feed production of live pigs, egg poultry and meat poultry decreased by 7%, 5% and 8% year-on-year, respectivel.
. However, the higher profits of the aquaculture industry have increased the enthusiasm of farmers for productio.
The first five months of 2022 will maintain moderate growt.
It is expected that the consumption of aquafeed in the Chinese market will increase in the 21/22 market yea.

 

Since May 2021, the feed industry has seen a decline in the proportion of soybean meal in its production formulations, affected by profit margin.
However, the content of soybean meal in the feed is a dynamic calculation based on the price-driven dynamics of the feed manufacturer and the end use.
As shown in the chart above, soybean meal prices peaked at RMB 5,000/metric ton ($746/metric ton) in March 2022 and fell to RMB 4,300/metric ton ($642/metric ton) in June of the same yea.
With the recent decline in soybean meal prices and the rise in global prices of other feed ingredient substitutes such as wheat, the use of soybean meal is expected to increase in marketing year 22/23. Meanwhile, soybean meal prices will continue to decline for the remainder of the 21/22 marketing year as imports increase, commercial inventories continue to build and the state reserves sell off soybean.

 

3 Analysis and forecast of soybean trade

 

The report lowered its previous forecast for soybean imports to China for the 21/22 marketing year by 1 million metric tons to 94 million metric ton.
Demand for imported soybeans has been muted as demand for vegetable oils in the restaurant industry continues to weaken and profit margins in the hog and poultry industries have been slow to recove.

 

According to forecasts in the report, China's soybean imports will recover in marketing year 22/23, reflecting a recovery in soybean meal and vegetable oil demand; however, higher local production is expected to reduce imports to some exten.
Therefore, the forecast for soybean imports in the Chinese market for the 22/23 marketing year is lowered to 98 million metric tons, down 2 million metric tons from the previous forecas.
This is due to the expansion of domestic soybean planting in China and the increase in production, some of which will enter the crushing channel in the Northeast region, directly competing with imported soybeans, and the slow recovery of consumption will continue into the first quarter of the 22/23 marketing yea.
The Chinese government and industry agencies have different forecasts for soybean imports in the Chinese market for the 22/23 marketing year, ranging from 92 million metric tons to 98 million metric ton.
Between metric tons and 93 million metric ton.

 

Soybean imports in China reached 66 million metric tons in the first eight months of the 21/22 marketing year, a decrease of 4 million metric tons, or 3 percent, year-on-yea.
During the same period, China's soybean imports from the United States were 23 million metric tons, down 26%, with a market share of 45%, down from 58% in the same period last year; China's soybean imports from Brazil reached 26 million metric tons, a year-on-year increase of 25.
The overall decline in imports reflects weaker demand for soybean meal and oil, as well as the impact of large sales of soybeans from China's state reserve.
The State Reserve soybean auction started on March 14 and was held every week since AprilAs of June 17, the cumulative supply of State Reserve soybeans (imported soybeans for crushing use only) was 3 million metric tons, and the total sales volume was 3 million metric ton.
reached 4 million metric tons, accounting for 38% of the total suppl.
When auctions began in mid-March, commercial inventories reached extremely low levels, with some crushers reporting they were out of stoc.
Weekly auctions have continued despite a recovery in commercial inventory in June, with no indication of when auctions will en.

 

Due to the increase in the supply of potato meal, the competitiveness in terms of price has also improve.
Therefore, the growth of imported soybeans and soybean meal is still limited despite the competitive advantages in terms of pric.
Demand for soybean oil and other vegetable oils is expected to increase, with ample supplie.