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Soybean Crushing Set to Shift to China

March 4, 2013
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March 4 (Bloomberg) -- Spare soybean crushing capacity in China big enough to process Argentina’s entire crop means the world’s largest oilseed consumer may start exporting more soy meal to southeast Asia, reducing demand for the livestock feed from Western Hemisphere suppliers, Rabobank International said.

China crushed about 61 million metric tons of soybeans last year, less than half the country’s processing capacity of 136 million tons, Rabobank analyst Pawan Kumar said today in an e- mailed report. Processors, which crush whole soybeans into meal used in feed and oil used for cooking, have expanded as China’s livestock herds grew. China’s imports of raw soybeans increased fivefold since 2001 to 58 million tons last year, while soybean meal exports are about 1 million tons, Kumar said.

Southeast Asia accounts for about 20 percent of world soybean meal trade, and about 76 percent of the region’s imports come from Latin America, Kumar said. In the past two years, meal shipped to the region from the Western Hemisphere was about $57 a ton cheaper than Chinese supplies. Still, Chinese processors could sell meal at a discount or break-even price to gain market share, or the government could allow shipments to be treated as re-exports, providing tax reimbursements, Kumar said.

"If price competitiveness from China is strong enough, a real geographical dislocation in the soymeal market is bound to occur," Kumar wrote. "The South America to Southeast Asia trade corridor could shrink and may disappear entirely, which means that around 9.3 million tons of export sales from the west will either need to be absorbed domestically or be sold to European or new markets."

Largest Grower

China, which accounts for about 60 percent of U.S. raw soybean exports, may consume 76.7 million tons of the oilseed this season, according to the U.S. Department of Agriculture. Brazil is set to become the world’s largest grower, producing 83.5 million tons, compared with 82.1 million from the U.S. and 53 million from third-place Argentina. China’s domestic crop is about 12.6 million tons, the USDA estimates.

 

"Soymeal exports out of China could offer an alternative for Southeast Asian imports, one that could provide up to 20 percent savings on freight compared to soymeal imports shipped from South America," Kumar wrote.

 

--Editors: Claudia Carpenter, John Deane

 

To contact the reporter on this story: Whitney McFerron in London at wmcferron1@bloomberg.net.

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