Ｓａｖｉｏｒ Ｗａｎｔｅｄ ｆｏｒ Ｈｏｍｅｍａｄｅ Ｓｏｙｂｅａｎｓ

Chinas soybean and soybean processing industry has been suffering in these years. But the situation never sees betterment. The adversity still continues.

In the year of 2008, the private soybean processing enterprises in Heilongjiang went through the disasters like the drastic surge and fall of the soybean price, having no soybeans to be reserved and overall stop of production. In 2009, these enterprises even face the danger of being squeezed out.

It is absolutely true that there is a large surplus in the soybean processing capacity of China. But the grain and oil giants still build the soybean oil refinery factory to enlarge its production capacity. Recently, China National Cereals, Oils and Foodstuffs Corporation (hereafter COFCO) started to build an edible oil comprehensive base which can process 6 million tons of edible oil in Tianjin. China Grain Reserve Company also plans to build an edible oil refinery factory in Heilongjiang.

“Building a factory in Tianjin aims at importing the genetically modified soybeans cheaper from the foreign countries,” said Liu Denggao, Associate Organizer of China Soybean Industry Association. In his opinion, this means to frustrate Chinas private soybean processing enterprises.

Liu Denggao said he didnt feel good when he saw that the living place for the private soybean processing enterprises is gradually seized by the giants. He said that the private enterprises which process the homemade soybeans are in danger of survival.

Domestic Giants Encroachment

On April 28, the Tianjin-based edible oil comprehensive base of COFCO was officially launched. The total investment is over 4 billion yuan (USD 586.4 million). When this base starts its production, the edible oil processing capacity of COFCO in Tianjin will reach 6 million tons. And the total processing capacity of this enterprise in China will be over 15 million tons.

Official sayings from COFCO told us that this project mainly aims at improving the ability of COFCO in processing the homemade soybeans. It is estimated that this base, once built, can purchase and process 1.5 million tons of homemade soybeans each year. This base also has the 100-thousand-ton edible oil dock, special railways and 600-thousand-ton reserve facilities.

It is known that another domestic grain and oil giant in China - China Grain Reserve Company – is also planning to build an edible oil refinery factory. The site will be in Heilongjiang.

Gao Ning, Board Chairman of COFCO said on April 28 that the Tianjin-based edible oil base will exert deep influence upon the market supply and stabilization of grain and oil prices. It will also increase the capacity of processing the homemade soybeans and drive the planting of homemade soybeans.

However, Liu Denggao raised doubts about the saying from COFCO. He asked: “Since COFCO wants to support the homemade soybeans, why doesnt it build the base in Heilongjiang, which is the main production region of homemade soybeans?” In his opinion, COFCO chose Tianjin as the base site for the convenience of importing foreign soybeans. COFCO is the domestic grain and oil enterprise with the largest import of foreign soybeans. The saying that they support the homemade soybeans is to deceive the public.

Foreign Soybeans Invasion

Lets assume that COFCOs base is truly for homemade soybeans. Will such a base ease the pain of the soybean farmers in China?

According to Cao Binghan, Deputy Director of the Comprehensive Department of Heilongjiang Branch, China Grain Reserve Company, his company purchases and reserves 4.09 million tons of soybeans in Heilongjiang, taking 40% of the output of the soybeans of the province last year. It also equals one fourth of the whole countrys output of soybeans last year.

But the result is: the large amount of reserve whose purpose is to protect the farmers benefits has turned the “live soybeans” in the market into the “dead soybeans” in the warehouses. The market space for 5 million tons of soybeans is taken by the imported soybeans. Liu Denggao was quite worried about this.

The journalist went to Heilongjiang on April 21 and saw that the local farmers had larger difficulties in selling the soybeans. 64 up-scale soybean processing enterprises in this province have stopped their production. The market share of the genetically modified soybean oil increased drastically from twenty percent to eighty percent.

Meanwhile, when the homemade soybean industry is gradually shrinking, the imported genetically modified soybeans encroach upon Chinas market. According to the statistics, the import amount of the genetically modified soybeans of China increased nearly by one hundred percent. Accordingly, the import amount of genetically modified bean pulp also takes most of the market share of farm animals forage in China.

Though it is not confirmed whether the genetically modified soybeans have harm to human beings, the crazy increase in the import amount of the foreign soybeans has brought about serious hit to the homemade soybean industry chain.

As of last October, the government, in order to protect the farmers benefits, stipulated that the minimum purchasing price of the soybeans is 3.7 yuan (USD 0.54) per kilogram. However, no one was interested in purchasing the soybeans at this price.

The dilemma of the macro adjustment is more than that. An insider from China Grain Reserve Company said: “When the edible oil price saw a crazy increase last year, our company dumped the semi-finished oil to the market in order to maintain the price. However, the speculators capitalized on this opportunity to gain a large amount of semi-finished oil and the price was beyond control.”

The insider also said that the main reason of the ineffective adjustment is the weak control of the China Grain Reserve Company over the industry chain. The quantity of the imported soybeans is nearly twice of the one of homemade soybeans. The adjustment is unavailable. According to him, the main purpose of the edible oil refinery factory is to extend to the downstream industry and improve the control power over the industry chain through which it can enhance of strength the macro adjustment.

Private Enterprises May Be “Squeezed Out”

The large-sized state-owned grain and oil enterprises build the edible oil refinery factory in the name of improving the processing capacity of the homemade soybeans. Actually, they prefer the cheaper genetically modified soybeans to take more market shares. In addition to the large surplus in the processing capacity of soybeans, the private soybean processing enterprises in Heilongjiang are facing the test of survival.

According to the introduction of Liu Denggao, the processing capacity of soybeans in China has exceeded the amount of imported soybeans nearly by 100 percent. The situation is still worsening.

Apart from COFCO and China Grain Reserve Company, Yihai Kerry Investment Co., Ltd also builds a factory in Heilongjiang. The foreign grain and oil enterprises are also entering Heilongjiang. They are speeding up in acquiring Chinas soybean processing enterprises.

According to the statistics from the customs, the soybean importation saw its highest number in the amount. Meanwhile, the Ministry of Commerce still organize groups to purchase the soybeans in the USA. China National Grains and Oils Information Center forecasted the imports amount of soybeans will be 38 million tons this year.

Compared with the domestic and foreign grain and oil giants, the private soybean processing enterprises are in adverse position in the aspects of capital, technology, scale, raw materials and so on. In addition to the genetically modified soybean oil whose price is low, the living space for the private soybean oil processing enterprises is undoubtedly squeezed.

Zhang Deyi, General Manager of Heilongjiang Mingda Grease Development Co., Ltd gave out his worries: “the low-price soybeans continue to impact the homemade soybeans. Maybe we will face the situation that we have no soybeans to be processed in the second half of this year.”