Why China imports soybeans from the US?

By Wyatt Mingji Lim | April 7, 2018

A Chinese Love Story of Soybean

source: https://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/usa/chn/show/2016/

The entire squabble between Beijing and Trump, where they slap tariffs on each other like its just same children game, had shine the spotlight on one particular item, that China had just slap the tariff on: Soybean.

A quick search on the MIT’s Observatory of Economic Complexity app, you will find the above visualisation (screenshot) of a massive patch of orangey-yellow, named Soybeans at 12%. This actually shows that, in 2016, 12% of all imports from US into China is soybean. That’s actually a lot of soybean!

So I digged further, into why China need so much soybean and why they have to buy it from USA… and I found this piece by Lester R. Brown: China and the Soybean Challenge

…and this turned into a Chinese Love Story of Soybean that is developing in my mind as I research more. Below is an answer I had just written on Quora as I made my discoveries: Why does China import soybeans from the US?

While doing some research on the precipitating trade war between USA and China, I discovered something interesting that no one answered entirely correct in the answers here (since I was doing research, thus I came upon here)

China import soybean for a very simple reason: China cannot produce enough soybean for itself.

In 1959–1961, the Great Famine killed millions of people via starvation – an event so catastrophic, that it reinforced the importance of grain (aka rice) cultivation for self sufficiency, in a rice eating country like China.

Thus, when you contrast it with the fact that, while as recent as 1995, China was producing 14 million tons of soy beans and consuming 14 million tons – the number ballooned to 70 million tons in 2011.

So if China were to produce all 70 million tons of soy bean they need, it will mean that they need to convert 1/3 of the grain land to soybean – forcing China to import 160 million tons of grain (which is also more than 1/3 of the total grain consumption in China in 2011).

So, yes China is big, but arable land, there is only so much. China have a massive population to feed, thus, converting land for grain, to soy bean – is extremely impractical, not to mention, impossible.

And just in case you want to say, “我们可以不吃豆！(we can don’t eat bean)” – a lot of the soy bean is not for you, its for your pigs.

Half of all pigs in the world is in China, and a huge faction of the soy bean is used for pig feed. Soy bean was discovered by animal nutritionists that 1 part soy bean meal with 4 parts grain, will sharply increase the efficiency with which livestocks and poultry – including the pigs – convert the grain eaten, into animal protein (aka meat).

The growing population with the growing wealth and affluence also means that Chinese are eating more meat than ever before in its 5000 years of bloody but glorious history. And we love to eat pork! (yes I’m Chinese, racially)

So unless you (I mean Chinese nationals), can say “我们也可以不吃肉！(we can also don’t eat meat)” , then I have to strongly dismiss any answers here that China buy soybean just to spend US dollars or due to trade imbalances (honestly, China had never cared about trade imbalance, it is imbalance to China’s advantage, why would China want to eliminate the imbalance? It is this imbalance that made China so wealthy and powerful today!)

Today, analysts had estimated that China to import more than 100 million tonnes of soy bean for 2017/2018, due to strong demands for animal feed for its world biggest pig market. So, this “hunger” for soy bean is just getting greater and greater… (source: China 2017/18 soybean imports to rise above 100 mln T, pork to fall -analyst)

China is also shifting its imports of Soy Bean slowly to Brazil, as the protein level in US produced soy is declining, while Brazil’s soy is of higher protein level.

So thats about it, so in summary: China import soy bean from USA, because… PIGs.

So just adding on to the above,

Today’s top 3 soybean producers in the world:
United States at 108 million metric tons,
Brazil at 86.8 million metric tons
Argentina at 53.4 million tons.

Together they account for over four fifths of world soybean production.
China is a distant fourth at 12.2 million metric tons.
source: 10 Countries With Largest Soybean Production

China today is trying to diversify its soybean sources away from United States, but with limited success, as China imports 60 percent of all globally traded soybeans, to feed its world’s largest livestock industry – there is literally no way to escape importing soybean from USA. Currently Brazil supplied half of China’s soybean import needs, while USA supplies around 33%

This very fact means that, even if China slap tariffs on US soybeans, Chinese companies will still have no choice but pay the higher price for the soybeans. The situation is not helped by the drought in Argentina, that wiped out its output to only 7.7 million tons (out of 53.4 million tons of its full capacity).

Feed makers in China are already drawing up contingencies, like changing the formula, add more of other ingredients like corn – but it may not be sufficient to maintain the protein levels of the feed that is required for the poultry.

The entire tariff may very be paid for by the Chinese populace, as the higher soybean cost increases overheads, thus inflating pork prices – contributing to the increasing cost of living in China.

Good read: China deploys soybeans in trade war, but may hit own foot

Thus, as far as soybean is concerned, China is not likely to “win” against USA in the current “trade war” via its soy bean tariffs, because China had already been moving away from US soybeans due to its poorer protein level and poorer quality of imports due to foreign materials in the cargoes, like weed seeds, a sign of the problem US farmers are facing, while fighting herbicide-resistant weeds. ( source: China tightens quality standards of soybean imports from the US )

So as, in a world where there is only a few main producers of soy bean, US soy bean is something that China have no choice but to content with… for now.

Additional Read: China’s Insatiable Demand for Soybeans