According to the Ministry of Agriculture (MOA), this year's soybean acreage is expected to increase 3.3 per cent to 9.3 million hectares.

With the growth of soybean acreage, the MOA projects that the country's soybean production will reach 15.7 million tons, 700,000 tons more than last year.

This year, the MOA is devoting great efforts to develop the high-oil soybean production bases covering 0.7 million-hectares of farmland in Northeast China's Heilongjiang, Jilin and Liaoning provinces and North China's Inner Mongolia Autonomous Region - the nation's main production areas.

The ministry hopes to help the nation's soybean growers further trim production costs, improve soybean quality and achieve high yields.

The move has boosted the local governments' and farmers' confidence in the cultivation of soybeans.

Another reason for the growth of soybean acreage is the price hike in the domestic market brought by China's genetically modified organisms (GMO) rules implemented on March 20.

According to the GMO rules, imported genetically modified products must be clearly labelled, and overseas firms exporting genetically modified products to China must obtain certificates from the MOA.

Since it takes time to obtain certificates, the country has seen a slowdown in soybean imports and an increase in the domestic price of soybeans in April and May.

However, domestic supply, estimated at 15.7 million tons for this year, is still incapable of satisfying the nation's demand for soybeans, leaving room for imports.

The MOA predicts domestic demand for imported soybeans will total 9 million tons from October last year to September.

The soybean imports resumed in June after a two-month halt following the implementation of the GMO rules. It is estimated that the import volume will be about 600,000 tons for last month.

According to statistics from the General Administration of Customs, the country imported 2.794 million tons of soybeans during the first four months of the year, a 12 per cent decrease compared with the same period last year.

Though imports slowed down, supply can still meet domestic consumption demand as a result of stock.

However, the imports might fail to satisfy the needs of some processors which depend heavily on imported soybeans.

With the gradual increase in imports and the harvest of domestic soybeans in September, the domestic supply is expected to be abundant and the price will become stable, or even decrease slightly.

The soybean imports are affected by the nation's GMO rules, as well as the related World Trade Organization (WTO) rules in the first year after China joined the WTO in December.

This year's import quota for soybean oil is set at 2.518 million tons, with an in-quota tariff of 9 per cent, compared with 13 per cent last year. And the import quota for rape seed oil is 878,900 tons, with a within-quota tariff of 9 per cent, down from last year's 20 per cent.

The tariff cut makes the cost, insurance and freight of imported soybean oil and rape seed oil lower than the market price of China's produced oil.

Thus, oil imports will increase. According to MOA's estimation, the country will import 250,000 tons of soybean oil, compared with last year's 80,000 tons.

During the January-April period, imports of soybean oil totalled 64,000 tons, 45.2 per cent up compared with the same period last year.

The increase in oil imports fills up the domestic demand for soybeans, since major demand for soybeans arises from soybean oil production.The price gap between domestic and imported soybeans will also greatly influence soybean imports.

Currently, imports do not have advantages over domestic soybeans in terms of price, partly due to a new farm bill passed in the United States, a major soybean exporter to China.

The bill, announced this year, lowers the loan rate for soybeans, reducing the subsidies for US soybean growers and, thus, dampening their enthusiasm.

US soybean acreage this year has fallen slightly, partly as a result of the soybean price likely to pick up in the global market.

The author is a senior expert with the Information Centre under the Ministry of Agriculture.

(Business Weekly July 10, 2002)