China's livestock farming pushes imports

The increasing soybean surpluses in North and South America are largely flowing to China. But the country is also one of the biggest consumers of oilseeds, driven by growing meat production, and is therefore a direct competitor of the EU. 

China is by far the largest importer of soybeans. This is not new news. But the country's importance for the international oilseed markets goes far beyond soybeans. If you add up the global consumption of all oilseeds, China alone accounts for 23% of demand. This corresponds to a volume of 171 million tons. If we focus on the three most important oilseeds on the world market (soybean, rapeseed and sunflower account for 97% of the traded oilseed volume), China's consumption amounts to 141 million tons. The share of total global consumption rises to 27% on this basis. 

However, China's market significance is not only due to the pure consumption figures, but above all to the great importance of imports. China's level of self-sufficiency in oilseeds has fallen further over the past ten years from 26% to just 23% recently. And this means that today, almost six out of ten tons of soya, sunflower or rapeseed traded on the world market are shipped to China. What are the prospects for the coming months - both in China and for exporters? 

Constant oilseed production expected

The US Agricultural Attaché in Beijing recently ventured an initial outlook for the new 2024/25 season, which does not start until October, but by May at the latest, the USDA will give its "official" indication of where global harvests could be heading in the new year. From this point onwards, the international futures markets react to the changes in the previous estimate with each new forecast. 

In its projection, the US market observer assumes that production figures for soybeans, rapeseed and sunflowers will remain largely stable year-on-year. In contrast to the official statistical data from China, the US Agricultural Attaché does not put the past 2023/24 soybean harvest at a record-high 20.8 million tons, but at 19.7 million tons. He is therefore not relying on the reports of peak yields (of 2 t/ha) on a record area. 

The current price trend does not support a significant expansion of acreage: according to China's statistics bureau, domestic soybean prices have fallen significantly since the fall of 2023. At USD 677/t, they were 15% below the previous year's level in March. At the same time, the US analyst refers to media reports that the state subsidy for soybean cultivation in several provinces will also amount to at least USD 740/ha in 2024/25. This level is higher than the payments granted for maize and counteracts a decline in soybean acreage.

China is brightening up its import balance

There are discrepancies not only in the 2023/24 harvest volume, but also in China's import statistics. For the 2023 calendar year, the import volume for soybeans in the customs authority's books is just under double digits after a downward adjustment. The symbolic mark of 100 million tons will thus be avoided. The customs office does not provide a reason for the reduction. This is also likely to be difficult: If you add up the quantities delivered to China from Brazil, the USA and Argentina, the bottom line is already 102 million tons, plus a few 100,000 tons from small sources. Beijing may be using this maneuver to conceal the fact that, despite an alleged record harvest, the necessary imports are continuing to rise. However, it is now also clear that the import volumes reported by China can no longer be regarded as valid.

Soybean meal consumption in China at record level

Taking the marketing year as the basis instead of the calendar year, the US market observer assumes stable import demand of 103 million tons of soybeans for 2024/25. This assumption is based on the expectation that the demand for soybean meal in China's livestock sector could reach a record level of more than 75 million tons due to the fall in meal prices. Where will the necessary soybeans come from?

In view of the recent harvests in South America, this question does not currently arise. Farmers on the subcontinent harvested an estimated 222 million tons of soybeans. The year-on-year increase of 20 million tons is so substantial that stocks in the region are likely to climb to a five-year high of 60 million tons by the start of the 2024/25 season. This alone is enough to supply the global market until the start of the harvest in the USA. There, in turn, there are signs of a growing soybean area. In the report on US farmers' cultivation intentions published at the end of March, the USDA expects soybean acreage to increase by around 1.2 million hectares year-on-year to 35 million hectares. The assumed increase is based on increasing demand from domestic oil mills for soybean oil for biodiesel production. Based on the yields of the past five years, this would result in a harvest potential of 112 to 122 million tons (2023: 113 million tons). The USDA traditionally provides an initial harvest forecast for the new marketing year in May.

For Brazil, the local supply authority (Conab) recently forecast a further increase in soybean area of around 500,000 hectares to 45.7 million hectares. This means that growth is expected to halve in the coming sowing season. The reasons cited for this are high production costs, lower revenues and shrinking margins for producers.

China also plays a leading role in rapeseed

China is the third largest rapeseed producer (behind Canada and the EU) and the second largest rapeseed importer and consumer (both behind the EU). In addition, there are extensive purchases of rapeseed oil and meal, which account for a third and around a quarter of global trade respectively. As with soybeans, the Middle Kingdom is therefore chronically undersupplied when it comes to rapeseed - very similar to the EU.

More importantly for us in the EU, China is the biggest competitor on the global market. The problem is the unpredictability of Chinese purchases. Imports of rapeseed in particular fluctuate significantly from year to year, regardless of the country's own rapeseed harvest. In the past five years, purchases have ranged from 1.7 to 5.3 million tons (with the rapeseed harvest tending to increase). This is less pronounced for rapeseed oil, but still noticeable. Only the volume of rapeseed meal purchases is slowly but steadily increasing: 2.7 million tons are on the cards for 2023/24 - a quarter of global trade.

China competes with the EU for goods from Canada and Australia

The new harvests there are not due until late fall. The EU is therefore initially interested in its own harvest. The EU Commission forecasts this at 19.5 million tons (previous year: 19.8 million tons). Higher yields are expected to offset half of the impact of the 4% reduction in acreage. The focus then shifts to Ukraine. It will cover most of the additional demand in the second half of the year. In the event of a poor harvest there, the EU and China would get in each other's way on the world market. However, this does not look likely at the moment. The Ukrainian Association of Vegetable Oil Processors estimates this year's rapeseed harvest at 4 million tons, only slightly below the record year of 2023.

The market for sunflower products in China is twofold

The domestic harvest of sunflower seed, which has almost halved to 1.7 million tons since the record year of 2016/17, is largely used for human consumption or exported (which is partly offset by purchases). The oil produced is also used in food production, with 84% of the processed volume of 1.6 million tons being covered by purchases on the world market.

Although the use of sunflower meal in animal feed has doubled to 3.8 million tons since 2018/19, this barely accounts for 4% of total domestic oilseed meal consumption. And here, too, China is dependent on purchases that exceed its own production many times over and are likely to reach a new peak of 3.5 million tons in 2023/24.