Trade and markets
 

Detail

Area
China (Mainland)
Commodity Group
Oilseeds, oils and meals
Commodity
Soybeans
Date
01/12/2013
Policy Category
Stocks
Policy Instrument
Public procurement/state reserves
Description
Announced end of public procurement, stockpiling and auctioning system for soybeans
Notes
CHINA – stock policies: According to official sources, in 2014, China’s public stockholding system for soybeans is to be abandoned and replaced with direct subsidies to farmers. Details on when and how exactly the policy change will be implemented have yet to be provided. The new income protection system for soybeans will likely be introduced on a trial basis in the Northeast and in Inner Mongolia; region-specific subsidy payments should be based on target prices, with subsidies being granted to producers (or to consumers) whenever market prices fall below (or exceed) given target levels. The current procurement system for soybeans was introduced in 2008/09. The policy was aimed at stimulating domestic production in particular of non-GM soy varieties, which provide the basis for preparing tofu and similar products for local human consumption. The government started procuring soybeans when farm gate prices would fall below certain levels. Sales from public stocks were effected through public auctions, often with a view to check rises in local consumer prices. Over the years, this policy led to the accumulation of large and costly public inventories. The system attracted increasing criticism for generating distortions between domestic and global prices. In fact, crushers found it increasingly convenient to import soybeans rather than buying domestic produce. Furthermore, the procurement policy did not succeed in stimulating domestic soybean production. Reportedly, along with soybeans, the government is planning to dismantle also cotton stockpiling. By contrast, procurement and stockholding operations for rapeseed, maize and sugar should remain in place for the time being, as would minimum farm gate prices for wheat and rice. According to market observers any change in China’s cotton support policy are bound to significantly affect world trade, production and prices of cotton. For soybean, the impact should be smaller and only of a temporary nature, because crushers in the coastal region, where most of the country’s soybean processing takes place, are expected to continue to depend heavily on imports.