Report Highlights:

In addition to growing demand for oilseed products, the low price of soybeans is expected to push China's soybean imports to a record 76 million tons in MY14/15, up from the 70.4 million tons in the previous year. This high net growth is unlikely to continue but imports are expected to rise to a forecast 78 million tons in MY15/16. Post's August forecast for MY15/16 total domestic oilseed production is 3.26 million tons lower than the estimated 57 million tons in MY14/15. Lower domestic production together with growing demand for protein meal and vegetable oil continue to encourage strong imports of oilseeds in MY15/16. Meanwhile, MY14/15 imports of vegetable oil declined in response to the increase in oilseed imports.

Executive Summary:

In addition to growing demand for oilseed products, lower soybean prices are expected to push China's soybean imports to a record 76 million tons in MY14/15, up from the 70.4 million tons in the previous year. This high net growth is unlikely to continue but imports are expected to rise to a forecast 78 million tons in MY15/16. Post's August forecast for MY15/16 total domestic oilseed production is 3.26 million tons lower than the estimated 57 million tons in MY14/15. Lower domestic production together with growing demand for protein meal and vegetable oil continue to support strong imports of oilseeds. MY14/15 imports of vegetable oil declined in response to the increase in oilseed imports. In addition, effective on September 1, 2015, imports of corn and substitutes will be subject to an Automatic Import License system which could slow trade in these commodities in the short-term. Less DDGS imports could drive the use of more soybean meal in feed.

China's oilseed production unlikely to increase

Soybeans: Post forecast for MY15/16 soybean production of 11 million tons remains unchanged. China's domestic soybean production continues to fall as a result of lower per unit profits compared with grain crops. According to China's National Grain and Oils Information Center's (CNGOIC) August report, MY15/16 soybean planted area was 6.1 million hectares (MHa), down 700,000 Ha from the previous year. Heilongjiang Province has seen the highest fall in planted area among all provinces, down 18.5 percent or 480,000 Ha over the previous year. CNGOIC thus estimated MY15/16 soybean production is estimated at 11 million tons, down by 1.15 million tons over MY14/15 (of which 900,000 tons are from Heilongjiang).

As reported in July, China's Ministry of Agriculture (MOA) called for adjustment on crop mix in the Northeast provinces in 2016. However, the lack of details in how this crop adjustment proposal would be executed indicates it will have a limited impact in boosting soybean planted area in 2016. Other factors depressing soybean production is the implementation of the target-price based subsidy that went into effect in MY14/15. Industry sources reported that the MY14/15 average selling price, including an average subsidy of RMB500/ton ($80/ton) was lower than the “floor price" of RMB4,800/ton ($774/ton) given under the MY13/14 support policies.

Rapeseed: CNGOIC data shows that as of August 15, total purchased volume by major enterprises in the 9 rapeseed-producing provinces were merely 1.22 million tons. This volume is dramatically lower than the 3.11 million tons in the previous year. This market information differs from China's National Statistics Bureau (NSB) estimate for MY15/16 domestic summer harvested rapeseed production of 13.88 million tons.

In addition, CNGOIC reported more details on the subsidy policy by province with RMB 450/Ha ($75) in Jiangsu and Hubei provinces. This subsidy amount is lower than previously reported. Anhui and Sichuan provinces also released subsidy policy details. However, it remains difficult to quantify the actual per area subsidy amount. Industry sources widely believe that the rapeseed farmer's gross income per ton in MY15/16 (at about RMB3,720/ton or $600/ton) is significantly lower than the floor price of RMB5,100/ton ($823/ton) received during the previous year.

Despite the NSB's high production estimate, most industry sources believe that the MY15/16 production remains as low as in the previous years. Given lower farmer income and current market trends, many expect China's rapeseed area to decline further in 2016.

Cottonseed: Post forecast for MY15/16 cottonseed production of 9.54 million tons, remains unchanged from its previous report. This is 2.2 million tons lower from than the previous year mainly as a result of changes in government's subsidy policy.

Peanuts: Post forecast for MY15/16 peanut production of 16.7 million tons, also remains unchanged from its previous report. This forecast is up slightly from the estimated 16.5 million ton in MY14/15.

MY14/15 soybean imports likely to hit record of 76 million tons

MY14/15 soybean imports continue to be strong despite a slight fall in feed production during the first months of 2015. Soybeans imports hit a record 9.5 million tons in July increasing total soybean imports in the first 10 months of MY14/15 to 63.3 million tons, up 6.8 percent from the previous year. Based on industry estimates, imports in the last two months are likely to exceed 13 million tons. This signals that total imports for MY14/15 could reach 76 million tons. Most industry insiders are doubtful the average yearly net growth of 8 million tons in soybean imports during MY13/14 to MY14/15 reflects the actual demand growth. The excessive soybean imports are expected to add carry-in stocks which will likely limit the net import growth in MY15/16.

Although high soybeans imports are supported by a growing domestic demand for soybean products and the large domestic crushing capacity, the current weak global soybean price encourages Chinese importers to buy more. As reported by industry sources, during July 2015 the price after duty for imported soybeans stood between RMB3,100 to 3,200/ton (or $500 - $516). This is about $200/ton lower than the domestically produced soybeans. The crushing sector also reported reasonable crushing profit in recent months. China's lower supply of other meals including rapeseed meal and cottonseed meal together with high corn prices encourages feed mills to use more soybean meal. China continues to produce concentrate supplementary feed and feed pre-mixed with feed additives which require the addition of protein meals before consumption. Increase use of whole soybeans as a feed ingredient, and imported soybeans for food processing also drives imports high. Recently, China's regulatory agency intensified supervision of use of imported soybeans which is likely to reduce the use of imported soybeans for food processing. China's policy specifies that imported GMO soybeans should strictly be crushed or used as feed ingredient.

The “hog to corn price ratio" maintains

Feed demand is expected to recover in the coming months. MOA data indicated the “hog to corn price ratio" exceeded the breakeven point since June 2015 and has continued growing until the 33rd week. Based on ChinaJCI Consulting's data, although hog prices remain somewhat stable, due to low corn price, the ratio reached 7.62:1 in the 34th week (Aug 15-21) up from the 7.29:1 during the 30th week (July 18-24). Increasing hog prices are expected to boost swine inventory demanding more feed in the second half of 2015. Egg prices also increased since mid-August contributing to the highest profit for farmers in 2015.

MY14/15 rapeseed imports unchanged at 4.5 million tons

MY14/15 rapeseed imports remain unchanged at 4.5 million tons, same level as the previous report. Given a smaller-than-reported domestic rapeseed production marketed at a low price, MY15/16 rapeseed imports could be higher than the forecast of 4.6 million tons, if rapeseed crops from major rapeseed suppliers, like Canada, do not fall significantly.

Imports of corn and substitutes subject to “automatic import license"

According to a joint notice by the Ministry of Commerce (MOC) and the State Administration of Customs Public Notice [2015] No.34, barley, cassava, distillers' grains (DDGS), and sorghum will be included into the “Catalogue of Goods Subject to Automatic Import License Administration"(AIL), starting from September 1, 2015.

Catalogue of Goods Subject to Automatic Import License Administration

Commodity

HS Code

Note

Unit

Barley

10031000

Seed

kg

10039000

Other

kg

Sorghum

10071000

Seed

Kg

10079000

Other

Kg

Cassava

07141010

Fresh

Kg

07141020

Dried

Kg

07141030

Chilled or frozen

Kg

DDGs

2303300010

-

kg

According to MOC, currently, imports of soybeans, rapeseed, vegetable oils and soybean meal are subject to AIL. As of this report, Post has not heard any complaints related to the AIL procedures for imports of these commodities. However, China's surged imports of corn and its substitutes in recent months, particularly in July, with record import volume triggered debate among all stakeholders on the purpose for the implementation of AIL to these commodities. Imports of these commodities could be somehow impacted or slowed in the short-term due to this policy uncertainty. DDGS is used to substitute part of soybean meal in feed production in China.

China's feed mills are taking advantage of low foreign prices to increase imports, replacing expensive domestic grains. DDGS imports mainly from the United States were at a record 1.1 million tons, higher than the June record of 959,935 tons, and 67 percent higher than last July. Barley imports were 1.28 million tons, up 68 percent from the same period in 2014, mainly from France and Australia. In July, sorghum imports reached 1.1 million tons, up 183 percent from last year same period. Corn imports were 1.1 million tons in July, skyrocketing from the 86,000 tons in last July, of which 938,344 tons were from Ukraine.

Vegetable oil imports expected to fall

China's vegetable oil demand is increasingly met by the large domestic crushing sector favoring imports of oilseeds. Total vegetable oil consumption is still growing, with net growth estimated at about 600,000 tons per year. However, MY14/15 imports of major vegetable oils are estimated to fall with soybean oil imports plummeting to 700,000 tons from the 1.35 million tons in MY13/14. Similarly rapeseed oil imports are estimated down to 750,000 tons in MY14/15 from the 902,000 tons, and palm oil imports are expected to fall to 5.3 million tons in MY14/15 from 5.57 million tons in the previous year

Soybeans

PSD Table

Country

China, Peoples Republic of

Commodity

Oilseed, Soybean (1000 tons; 1000 Ha)

2013/14

2014/15

2015/16

USDA Official

Post Estimate New

USDA Official

Post Estimate New

USDA Official

Post Estimate New

Market Year Begin

10/2013

10/2014

10/2015

Area Planted

7700

6850

7700

6600

6400

6100

Area Harvested

6850

6850

6800

6600

6400

6100

Beginning Stocks

12378

12378

14427

14427

17552

17202

Production

12200

12200

12350

12000

11500

11000

MY Imports

70364

70364

77000

76000

79000

78000

MY Imp. from U.S.

27041

27040

30000

30000

28500

30000

MY Imp. from EU

0

0

0

0

0

0

Total Supply

94942

94942

103777

102427

108052

106202

MY Exports

215

215

175

175

200

200

MY Exp. to EU

10

10

10

10

10

10

Crush

68850

68850

74200

73000

79500

77000

Food Use Dom. Cons.

9650

9650

10000

10250

10350

10350

Feed Waste Dom. Cons.

1800

1800

1850

1800

1850

1900

Total Dom. Cons.

80300

80300

86050

85050

91700

89250

Ending Stocks

14427

14427

17552

17202

16152

16752

Total Distribution

94942

94942

103777

102427

108052

106202

CY Imports

71399

71401

75500

76000

79500

78000

CY Imp. from U.S.

30028

30028

28000

30000

29000

30000

CY Exports

207

207

250

200

250

200

CY Exp. to U.S.

71

71

70

70

70

70

Rapeseed

PSD Table

Country

China, Peoples Republic of

Commodity

Oilseed, Rapeseed (1000 tons;1000 Ha)

2013/14

2014/15

2015/16

USDA Official

Post Estimate New

USDA Official

Post Estimate New

USDA Official

Post Estimate New

Market Year Begin

10/2013

10/2014

10/2015

Area Planted

0

7531

0

7500

0

7400

Area Harvested

7531

7531

7500

7500

7400

7400

Beginning Stocks

632

632

1036

1036

1236

1336

Production

14458

14458

14600

14400

14100

14100

MY Imports

5046

5046

4500

4500

3300

4600

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

20136

20136

20136

19936

18636

20036

MY Exports

0

0

0

0

0

0

MY Exp. to EU

0

0

0

0

0

0

Crush

18500

18500

18300

18000

17450

18000

Food Use Dom. Cons.

0

0

0

0

0

0

Feed Waste Dom. Cons.

600

600

600

600

550

550

Total Dom. Cons.

19100

19100

18900

18600

18000

18550

Ending Stocks

1036

1036

1236

1336

636

1486

Total Distribution

20136

20136

20136

19936

18636

20036

CY Imports

5081

5081

4100

4400

4000

4500

CY Imp. from U.S.

0

0

0

0

0

0

CY Exports

0

0

0

0

0

0

CY Exp. to U.S.

0

0

0

0

0

0

Peanuts

Country

China, Peoples Republic of

Commodity

Oilseed, Peanuts (1000 tons;1000 Ha)

2013/14

2014/15

2015/16

USDA Official

Post Estimate New

USDA Official

Post Estimate New

USDA Official

Post Estimate New

Market Year Begin

10/2013

10/2014

10/2015

Area Planted

4650

4633

4850

4500

4600

4580

Area Harvested

4633

4633

4700

4500

4600

4580

Beginning Stocks

0

0

0

0

0

0

Production

16972

16972

16500

16500

16700

16700

MY Imports

50

27

125

140

50

120

MY Imp. from U.S.

0

7

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

17022

16999

16625

16640

16750

16820

MY Exports

565

565

510

510

530

420

MY Exp. to EU

200

200

200

200

200

200

Crush

8710

8710

8700

8530

8700

8670

Food Use Dom. Cons.

6585

6660

6620

6620

6670

6680

Feed Waste Dom. Cons.

1162

1064

795

980

850

1050

Total Dom. Cons.

16457

16434

16115

16130

16220

16400

Ending Stocks

0

0

0

0

0

0

Total Distribution

17022

16999

16625

16640

16750

16820

CY Imports

50

30

50

120

50

110

CY Imp. from U.S.

0

15

0

0

0

0

CY Exports

549

549

475

475

530

400

CY Exp. to U.S.

0

0

0

0

0

0

Soybean Oil

PSD Table

Country

China, Peoples Republic of

Commodity

Oil, Soybeans (1000 tons;1000 Ha)

2013/14

2014/15

2015/16

USDA Official

Post Estimate New

USDA Official

Post Estimate New

USDA Official

Post Estimate New

Market Year Begin

10/2013

10/2014

10/2015

Crush

68850

68850

74200

73000

79500

77000

Extr. Rate, 999.9999

0.1792

0.1792

0.179

0.1812

0.179

0.1787

Beginning Stocks

1021

1021

958

958

845

482

Production

12335

12335

13280

13224

14230

13760

MY Imports

1353

1353

900

700

950

750

MY Imp. from U.S.

186

186

150

1

125

5

MY Imp. from EU

0

0

0

0

0

0

Total Supply

14709

14709

15138

14882

16025

14992

MY Exports

94

94

100

100

80

60

MY Exp. to EU

0

0

0

0

0

0

Industrial Dom. Cons.

0

0

0

0

0

0

Food Use Dom. Cons.

13657

13657

14193

14300

15237

14522

Feed Waste Dom. Cons.

0

0

0

0

0

0

Total Dom. Cons.

13657

13657

14193

14300

15237

14522

Ending Stocks

958

958

845

482

708

410

Total Distribution

14709

14709

15138

14882

16025

14992

CY Imports

1135

1135

1000

700

1000

800

CY Imp. from U.S.

186

186

150

1

125

5

CY Exports

100

90

80

80

80

60

CY Exp. to U.S.

0

0

0

0

0

0

Rapeseed Oil

PSD Table

Country

China, Peoples Republic of

Commodity

Oil, Rapeseed (1000 tons;1000 Ha)

2013/14

2014/15

2015/16

USDA Official

Post Estimate New

USDA Official

Post Estimate New

USDA Official

Post Estimate New

Market Year Begin

10/2013

10/2014

10/2015

Crush

18500

18500

18300

18000

17450

18000

Extr. Rate, 999.9999

0.3556

0.356

0.3552

0.3639

0.355

0.3609

Beginning Stocks

2157

2157

2607

2539

2283

2229

Production

6579

6586

6500

6550

6195

6497

MY Imports

902

902

750

750

800

750

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

9638

9645

9857

9839

9278

9476

MY Exports

6

6

10

10

10

10

MY Exp. to EU

0

0

0

0

0

0

Industrial Dom. Cons.

0

0

0

0

0

0

Food Use Dom. Cons.

7025

7100

7564

7600

7700

7936

Feed Waste Dom. Cons.

0

0

0

0

0

0

Total Dom. Cons.

7025

7100

7564

7600

7700

7936

Ending Stocks

2607

2539

2283

2229

1568

1530

Total Distribution

9638

9645

9857

9839

9278

9476

CY Imports

810

810

900

750

900

760

CY Imp. from U.S.

0

0

0

0

0

0

CY Exports

6

6

0

9

0

10

CY Exp. to U.S.

0

0

0

0

0

0