China’s soybean production push weakens as subsidies dry up

China’s goal to increase soybean production to offset plunging imports from the U.S. is not going according to plan.
Beijing wants to increase soybean production 20% by 2020 over 2018 levels, as tariffs on American soybeans caused U.S. imports to fall 70%. But government subsidies aimed at encouraging growers to switch to soybeans have dried up, leaving farmers dismayed at what they see as broken promises.
“I don’t trust the government because its support programs frequently change,” said a farmer in his 30s in China’s soybean capital of Heilongjiang Province, where 40% of the nation’s soybeans are grown.
The grower had allotted 10% of his land to soybeans on the promise by the local government in February of a 150 yuan ($21.80) subsidy for every 667 sq. meters of land converted to soybeans. But the agriculture ministry suddenly nixed the subsidy in March, throwing the farmer’s finances into disarray as he had already purchased seed and fertilizer for his new crop.
Soybeans are crucial to feeding the country. They are processed into bean curd, cooking oil and other food products, and the pomace is an important livestock feed.
The government was hopeful that a new seed — developed under a $4.6 million grant — would increase yields. According to its creator, the Research Institute of Soybean, the new variety doubles yields.
“The new seed will allow China to weather the trade war,” said Cao Jujin, head of the institute, in reference to overcoming the dearth of American soybeans.
China is the world’s biggest consumer of soybeans at 100 million tons per year, but relies on imports for 90% of this figure.
Brazil is the country’s largest soybean supplier followed by the U.S. But Beijing slapped a 25% tariff on American beans in July 2018, causing imports from the U.S. to tumble 70% in the January-April period from a year earlier.
Although China increased purchases from Brazil, total soybean imports decreased 8% in 2018 from the previous year to 88 million tons.
To make up for the shortfall, Beijing announced plans to expand soybean farmland about 10% by 2020, which would bring soybean production to 19 million tons — an increase of 20% from 2018.
“Even if imports of soybeans from the U.S. decrease, we can stabilize domestic production,” said Han Jun, vice minister of the Ministry of Agriculture and Rural Affairs, in early June.
But government miscues and simple economics have cooled farmers’ response to any new plan. Soybean yield is only about 30% that of corn, meaning that only large-scale farms can earn profits.
“I have no intention of cultivating soybeans whatever the government says, because I can earn more from corn,” said a 57-year-old Heilongjiang farmer.
According to sources, fiscal concerns at the national level forced the ministry to cancel some subsidies. The 2019 budget includes 45.2 billion yuan for the agricultural, forestry and fisheries sector, down 24% from 2018.
To make matters worse, no one knows how much money has been earmarked this year for soybean subsidies. Zhang Jinjie, analyst at research company Sublime China Information Group, said the amount may be little changed from 2018. But there would have to be some kind of an increase if the government wants to reach the 19-million ton target, an industry official said.
Soybean production in China has lagged due to lack of mechanized farming and failure to increase farm size. The average yield of soybeans on the same area of land in China is about 40% that of the U.S., according to the Heilongjiang Academy of Agricultural Sciences.
This makes Chinese soybeans about 10% more expensive than imports, an increase that is reflected in the costs of soybean products.
Source: Nikkei