China Worries Over Soybean Prices... Pork Prices Plummet

China's Most Vulnerable Point Emphasizing Food Security... Soybean Prices Surge 40% Since Early Year
Concerns Over China's Potential Soybean Import Sweep, International Prices May Rise Further

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Chinese authorities have begun managing prices by releasing soybean reserves. Soybean prices in China have surged nearly 40% compared to the beginning of the year. China's soybean self-sufficiency rate is known to be less than 20%, with most imports coming from the United States, Brazil, and Argentina.

Amid the soaring soybean prices, an unusual phenomenon of plummeting pork prices is also occurring in China.

[Image source=Reuters Yonhap News]

According to Chinese media outlets such as People.cn and Zhongzheng.com on the 18th, as of the 15th, the average soybean price in China was 4,928 yuan per ton (approximately 940,000 KRW), up about 40% from the beginning of the year. The price of 4,928 yuan per ton is the highest in the past nine years.

Chinese media analyze that the surge in soybean prices is due to reduced soybean production in the United States and South America, as well as rising international crude oil and fertilizer prices.

Wang Lyawei, chief researcher at the China National Grain Information Center, said, "The Russia-Ukraine conflict, rising international crude oil and fertilizer prices, and a decrease in soybean cultivation areas have increased uncertainties, causing soybean prices to rise significantly." He added that efforts are being made to stabilize soybean prices through policies such as joint soybean purchases, releasing reserves, and expanding soybean cultivation areas.

In fact, Chinese media reported that state-owned enterprises such as the China National Grain and Material Reserve Bureau and the National Grain Exchange recently released 442,000 tons of soybeans into the market.

Additionally, the Chinese government plans to increase the soybean cultivation area by 20 million mu (1 mu equals 243㎡, 1.33 million hectares) this year to raise the soybean self-sufficiency rate. Expanding soybean cultivation areas is also a special directive from Chinese President Xi Jinping.

Last December, at the Central Rural Work Conference, President Xi emphasized, "The rice bowl of the Chinese people must always be firmly held in our hands, and that rice bowl must be filled with Chinese grains." He instructed that the cultivation area and yield of oil crops such as soybeans should be expanded. From the perspective of the Chinese leadership emphasizing food security, soybeans are a sensitive issue.

The reason the Chinese leadership is so sensitive to soybean prices is due to pork prices. Soybeans, along with corn, are major feed ingredients for pigs. Generally, when feed prices rise, pork prices also increase, but in China, pork prices are plummeting. Concerned about rising feed prices, livestock farmers are rushing to slaughter pigs, causing wholesale pork prices to fall nearly 50% compared to the beginning of the year. Although the Chinese government has hurriedly conducted three rounds of pork purchases, pork prices continue to decline.

The estimated pig population in China is 450 million. Analysts suggest that oversupply combined with rising feed prices is driving pork prices down. Major Chinese feed companies such as Dabainong Group have recently raised feed prices by 250 to 300 yuan per ton.

There are also criticisms that the pork oversupply is a result of government missteps. When African Swine Fever (ASF) broke out in 2018-2019, the Chinese government promoted modernization of pig farming and opened the door for large corporations to enter the livestock industry. With tax benefits and real estate support, large companies like Wanker Group entered the pig farming industry.

Although some Chinese provinces, including Heilongjiang Province (10 million mu), have decided to expand soybean cultivation areas this year, since it takes time until harvest, there is speculation that China may engage in massive soybean imports this year. There are concerns that a soybean crisis originating from China could occur.

China is reported to have imported over 100 million tons of soybeans last year.