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MGEX Research

RSS By: Joe Victor,

Joe Victor is a Business Development Specialist with Minneapolis Grain Exchange, Inc., where he monitors cash grain activity and cash grain opportunities. He provides marketing advice through this blog.

China Adds Another

Aug 21, 2009
News out of China reports China National Cereals, Oils & Foodstuffs Corporation (COFCO) has laid plans to erect its second largest soybean processing plant in the country’s southwest region. The company’s second largest plant is expected to begin construction in the month of September and once complete will have annual capacity of 1.2 million tonnes (44 million bushels). Interesting enough is the location, away from the country’s major soybean production region and nearer port facilities but equally interesting is how competitors of COFCO, both Sino Grain and Jilin Grain Group are also laying plans to open “new” facilities.
Allendale research data estimates annual per capita vegoil consumption for China of 37.7 pounds for 2009/10 and most definitely trend building from levels of 32.6 pounds in 2005 suggesting annual rate of growth of 3.12%. Of equal importance is the flavor of choice by Chinese consumers to overwhelmingly prefer soybean oil over palm oil by 67% for 2009/10 vs 47% in 2005/06 based on annual consumption data. Soybean oil consumption is the largest within China and holds a 2:1 ratio edge over rapeseed oil and 2.57:1 edge over palm oil suggesting the divergence between soyoil consumption and the lesser two continues to widen. China’s vegoil consumption is most definitely encouraging to soybean exporting countries as China’s annual soybean consumption is 3.46 times greater than production while wheat, rice and corn production is marginally higher than consumption.
The second most populated country, India with its 1.168 billion populous has a steady trend increase in its vegoil per capita consumption since 2006/07 and most definitely is making a major move for the 2009/10 marketing year with its record 25.6 pounds per person vs the previous year of 24.8 pounds per person. It is interesting to note the growth rate from 2007/08 to 2008/09 was a large 6% while 2008/09 to 2009/10 (3.2%) resembles China growth rate. Allendale Inc suggest although India’s per capita consumption is 47% less than China, it appears as though India is making a notable dietary move towards vegoils. We need to point out only India corn production is typically notably larger than consumption on a year by year basis and for most other key starch and vegoil crops close between production and consumption.
If China as well as India are to continue its westernization especially in the food diet arena and ultimately attempt to achieve the per capita consumption rate of vegoils which the United States enjoys, well quite frankly, they both have their work cut out for them as detailed within the graphic. Projected per capita vegoil consumption for the United States is 83.7 pounds, vs China’s 37.7 pounds and India’s 25.6 pounds. The bottom-line is the US should be very encouraged by the per capita growth trends of vegoil consumption within China and India and very encouraged China is trying to answer demand with the construction of its new soybean crush facilities.
What are your thoughts, is the USDA low in its 2009/10 China soybean imports of 38.1 million metric tonnes vs 39.1 MMT in 2008/09 and 37.82 MMT in 2007/08? If China and India are to continue its trend increase in vegoil consumption, will they attempt to become more self sufficient or rely upon major soybean producing countries? What short and longer term impact could China’s plans have on soybean prices?...............Joe Victor
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The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Commodity trading may not be suitable for recipients of this publication. This is not a solicitation of the purchase or sale of any commodities. Those acting on this information are responsible for their own actions. Any republication, or other use of this information and thoughts expressed herein without the written permission of Allendale, Inc., is strictly prohibited. Allendale Inc. c2009
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COMMENTS (8 Comments)

guaranteed profit? Did I read that right? Wow, I wish I was a crop farmer.
12:56 PM Aug 26th
My understanding its one of the lowest supplies in history. We could contract soybeans for 13-14- in June of 2008. Now when we heard supply finally reached historic lows market crashed Chinese rolled over to new crop and they will keep doing this. I think about 10 to 10.50 is breakeven in my area this year with corn at about 4. We need deficiency payments to start supplementing shortfall in markets before our expenses slowly erode all of the profit, it will happen.
10:14 PM Aug 22nd
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