China's Soybean Dilemma....Continues...

Earlier this week, I was asked if China’s restriction of canola imports for phytosanitary reasons could ever be reason enough to do the same to soybean imports. Just today newswires reported China’s imported soybean stocks are running dangerously low despite the oncoming of harvest in the northeast part of the country. This is exactly why China could never restrict soybean imports into the country—at least for any length of time. Even for political reasons it would be tantamount to suicide. Why? As I have long argued in this blog, while China is loathe being at the mercy of foreigners for anything other than FDI, soybeans (and palm oil) are two agricultural commodities that will always need to be imported. Palm oil plantations aren’t even planted in the country (maybe a bit in Hainan but that’s their version of Hawaii). For soybeans, what’s grown in the north simply isn’t enough and moving them elsewhere in the country is a logistical nightmare. Further, while the protein level is good, the oil content isn’t. And while roughly 2 mmt of soybeans are sitting in the state reserves, don’t bet on any major crushers seriously wanting to purchase these beans. They are bound and determined for crushers located in the northeast. Foreign crushers along the coast and in the major transportation areas don’t want them. Even now, as a colleague of mine laid out several months ago, the 15 mmt of domestic soybeans grown in NE China are a huge political liability. Better to get these in the hands of locally owned and operated crushers and ultimately solve the problem of offering a solution to NE China soybean farmers. In China, keeping the farmers happy and operating is never far from the government’s state of mind when solving most all agricultural issues.