Power Hour: Expect Continued Soybean Growth from China

January 25, 2013 08:30 AM
Power Hour: Expect Continued Soybean Growth from China

U.S. soybean exports are likely to continue strong over the next decade, although moderate from the torrid pace of the last 10 years. The rate of Chinese import growth could be more on the order of 5% to 7% per year from now to 2023, or about 3-4 million metric tons per year of imports, in the view of Keith Menzie, USDA oilseeds economist.

"We’re looking for continued import growth but at a slower rate than over the past 10 years," he says. Over that time, U.S. soybean exports to China have increased 360%, from 5 million tons to 23 million tons. China now accounts for 60% of world trade in soybeans. With such a high base that’s been developed, it’s simply not possible to continue to expect 15% to 20% year-over-year growth seen over the past decade, Menzie adds. Still, he thinks China will increase soybean imports on the order of 125 million bushels every year.

It’s hard to imagine what soybean demand and prices would be like were it not for China: More than 60% of U.S. soybean exports go to China today or one in four bushels produced. The other big player for the Chinese market is Brazil, with that nation likely to bring new acreages into production over the next decade to take advantage of the growing Chinese market, Menzie says.

The growth in U.S. soybean production, by contrast, will come mostly from higher yields. At some point the Chinese soybean market will reach a saturation point, but Menzie does not seeing that occurring for some time.

Most analysts look for a slowdown in China’s economic growth over the next decade, more on the order of 5% to 8%, a cool down from the double-digit growth over much of the past 10 years. Even more moderate growth, however, means increasing demand for protein in the diet, particularly animal protein, Menzie says. It’s not just more hog production, but the fact that China is shifting to more industrialized hog production that requires more protein fed, with a main component being soy.

By contrast, U.S. livestock demand for soybeans is increasing by about 1.5% per year. "That’s not exceptionally strong growth," Menzie says.

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