Monthly Archives: April 2004

Crushing competition: Soy may surpass wheat, maize in world trade

Wheat and maize have long been the dominant commodities of the international grain trade. However in terms of volume shipped and value in commerce, the soybean, technically a legume, has been gaining on its two rivals.

Global trade in wheat and corn has mostly hovered in the range of 100 to 110 million tonnes and 70 to 80 million tonnes, respectively, for more than 20 years. On the other hand soybean shipments have shot up from 31.6 million tonnes in 1995-96 to 67.5 million tonnes forecast for 2003-04, according to United States Department of Agriculture’s estimate. Further raising the soybean’s profile has been a more than doubling in prices to the highest levels in more than a decade at well over U.S.$300 per tonne in the first quarter of 2004.

China’s relentless economic growth and rising living standards account for over two-thirds of the increased world trade. The country’s imports of soybeans are expected to reach 23 million tonnes in the 2003-04 shipping season; in the 1995-96 season, China was still importing less than one million tonnes. China’s own soybean harvest at 16 million tonnes in 2003 is the fourth largest in the world, but it has failed to increase significantly in recent years despite greater demand and government measures to protect and stimulate the crop.

Underlying the sharp rise in China’s soybean imports has been a huge expansion in China’s soybean crushing capacity, fueled by domestic and international investment. That capacity is now estimated by industry analysts at 55 to 60 million tonnes per year, up from less than 20 million tonnes in 1995.

It is clear that the industry expects China’s soybean use to continue going up. The actual crush in 2003 was 24 million tonnes, taking up only about half of installed capacity. In 2003 alone, China’s soybean crush went up by around 3 million tonnes, but an additional 7 million tonnes of crushing capacity were added.


Increased soybean meal demand is partially explained by rising per capita meat and fish consumption. The average urban dweller consumed 43 kilograms of meat, eggs and poultry in 2002, a 26% rise since 1994. In the countryside, the figure was 22 kg per capita, but the increase was 44% over the same period. Aquaculture products consumption has increased 55% since 1994 to 13.2 kg per urban resident in 2002. Poorer rural dwellers consumed only 4.4 kg, but that was a 66% rise.

However one must go deeper than these trends to explain the huge jumps in China’s soybean consumption. Most important has been greater soybean meal inclusion in animal feed production. (See related story, “Soy’s growing importance” in China’s feed industry, in WG’s June 2003 issue, page 28; E-Archive #64035.)

The expansion and modernization of China’s feed milling industry, where new investment peaked in the early ‘90s, has led to an increase in the share of industrially produced compound feeds, and therefore of soybean meal, in China’s overall feed use. Soybean meal and equivalents were only 8.7% of all feed in 1994-95, but by 2002-03 that had risen to 15.5% out of 140 million tonnes of total feed. Yet China still has some way to go to reach the level in most developed countries, which is in the 20% to 25% range.


China’s soybean production is centered in the northeastern provinces of Heilongjiang, Jilin and Liaoning, as well as in Shandong, opposite Korea. The old crushing capacity is located inland away from ports in these regions, and consists of hundreds of small and medium sized plants of typically 100 to 400 tonnes per day capacity, with just a handful of facilities that process above 1,000 tonnes per day.

Many of these facilities operate only a few months a year immediately after the harvest, and a large number — 400 to 500 — of these plants have been shut down permanently. This former capacity may have amounted to 15 million tonnes per year and was fragmented among almost 1,500 plants just six years ago.

The new crushing capacity, on the other hand, has been built at deepwater ports and close to population centers around which modern integrated poultry operations and aquaculture farming are concentrated. These new plants dot China’s thriving coastline from Dalian in the northeast to Guangxi province bordering on Vietnam. Some industry insiders put the number of facilities built in recent years — almost all of which process more than 1,000 tonnes per day — at more than 50. All of them are set up to process imported beans, and they explain the huge increases in China’s soybean purchases abroad.

The booming Chinese market has been a boon to some specialized international equipment suppliers.

One Indiana, U.S.-based grain storage and handling company has already installed multiple units of a new model of its most powerful silo-bottom reclaimers at a number of sites in China that permit storage of 6,000 tonnes of soybean meal in 24-meter diameter concrete silos with fully automatic discharge rates of 400-tph. The company told World Grain that these capacities for meal are already substantially larger than anywhere else in the world and that in response to new demand from China, it designed a ‘Super Silo and Reclaim System’ for 16,000 tonnes of meal with automated discharge.

While there are still a great many players, the new investment in large scale plants has already led to considerable consolidation in the industry. The dominant force is the ADM/Wilmar Group in partnership with Cofco, China’s largest state grain company, with installed daily capacity of 30,000 tonnes. Their flagship operation is East Oceans Oils and Grains, located on the Yangtze River north of Shanghai, where an expansion to more than 12,000 tonnes daily capacity was completed early this year, making it one of the largest crushing facilities in the world.

The same companies control 12 other operating entities in China, and account for about 20% of the total oilseed crush in China. Another global player, Cargill, has two crushing ventures in southern China, one of which is slated for expansion to 6,000 tonnes per day.

The biggest domestic company is the Huanong Dalian Group which is now operating six plants with about 11,000 tonnes of total capacity. In 2003 the company reported crushing 3.5 million tonnes of beans. It will soon be building a new facility a few hundred kilometers up the Yangtze River in Nanjing.

A number of other larger state-owned soybean crushers in China’s northeast region have begun to reposition their operations, tying up with local investors to build large plants in ports to process lower cost foreign beans arriving in panamax vessels. The Port of Dalian, which offers 1.2 million tonnes of grain elevator capacity — thanks to a World Bank project completed in the late 1990s — is the site of several projects.

One of them is by Japan’s biggest oilseed crusher, Nisshin Oillio, which is beginning construction of a 2,000-tonne-per-day plant adjacent to its existing 800-tonne-per-day plant. The company intends to exploit China’s lower manpower and energy costs to ship meal, edible oil and soy-based products to its nearby home market, which could lead to a reduction of output there.

Indeed Japan is already taking more than two-thirds of China’s meal exports, which may greatly expand given the extra capacity of these efficient plants situated at large ports. Meal exports have yet to exceed one million tonnes per year. Still, several Southeast Asian countries have for some time been getting regular shipments from China, which enjoys several advantages over far away suppliers in North and South America. Smaller vessels of 5,000 to 10,000 tonnes are practical over the shorter distances, give access to shallower ports, and, with the quicker transit time, ease the financing burden.

The fact that many of the new plants have been designed for high protein meal — though there is little demand in China for it yet — indicates that soybean meal exports were part of their strategy from the outset.

Another impetus to increased soybean meal exports is that China still imported 1.7 million tonnes of edible oils in 2003. The country’s newly built crushing capacity could satisfy that demand, so long as the 7 million tonnes of meal produced to make that quantity of oil could be exported at satisfactory prices. If this occurred, China could gain the lion’s share of the market for imported soybean meal in other Asian countries at the expense of existing suppliers in the Western Hemisphere and India. In 2003, total Asian soybean meal imports were around 9 million tonnes.


China has added soybean processing capacity at a tremendous rate because of very healthy gross crushing margins. Oil and meal prices based on the higher price of domestically grown soybeans guaranteed handsome profits to the modern factories processing lower-cost imported beans.

Now with the doubling of world soybean prices and a temporary slowdown in Chinese demand due to the avian flu, one could ask whether too much capacity has been built. However, investors can still comfort themselves by multiplying China’s 1.3 billion people by Taiwan’s soybean annual crush of 90 kg per capita. For China to attain this level it would need to crush nearly 120 million tonnes, or twice its current capacity. It could be only a question of time, perhaps years rather than decades, before global soybean trade volumes surpass both wheat and corn.

Soybean’s wide variety of applications

by Dr. Irfan Hashmi

The astounding amount of uses for soybean products is the primary factor in its growing demand, particularly in food products but also for industrial uses. The whole soybean contains about 40% protein. Soybean uses can be divided into three major categories: oil products, whole soybean products and protein products.

Oil Products

The oil products can be broken down into glycerol, fatty acids and sterols. Refined oil products can have either edible or industrial uses. Edible products include coffee creamers, margarine, mayonnaise and pharmaceuticals. Technical uses include anti-static agents, caulking compounds, fungicides, inks and paints.

Whole Soybean Products

Whole soybean products are primarily edible products such as the seed; bean sprouts; baked soybeans; full-fat soy flour used in various products of baking; roasted soybeans used in confectioneries, soy nut butter and soy coffee; and other soy uses in traditional foods, such as miso and tofu. These are excellent sources of protein and dietary fiber.

Soybean Protein Products

Soy protein products can be categorized in four groups: soybean meals (which are used in many feed products), soy flour, soy concentrates and soy isolates. The edible uses include baby food, candy products, cereals, yeast and beer. Examples of technical uses are adhesives, antibiotics, binders, cosmetics, plastics and textiles. Soybean meal is considered a premium product because of its high digestibility, high energy content and consistency.

Isolated soy protein is the most refined form of soy protein and is often used in finished meat products to improve eating quality, cooking tolerance and enhance flavor. It is also commonly used in baked goods to boost nutritional value. Its most common form is powder, but can also come in granules and structured fibers. Isolated soy protein contains 90% protein on a dry basis.

Soy protein concentrates are prepared from defatted soybeans by removing the water-soluble carbohydrates. Soy protein concentrates take on the flavor of the foods they enhance and tend to improve the overall quality because they retain moisture and will hold flavor through multiple cooking processes. They contain about 70% protein and 23% dietary fiber. The two most common forms of soy protein concentrates are textured soy protein concentrates and powdered functional soy protein concentrates.

Soy flour is high in protein (twice that of wheat flour) and low in carbohydrates and is usually mixed in with whole grain flours in recipes. It has a wide variety of uses such as in baking and in sauces. Soy flour is the least-processed form of soy protein and typically contains higher levels of dietary fiber. Soy flour is prepared by grinding and screening soybean flakes either before or after removal of oil, and protein content varies from 40% to 54%. Soy flour also varies in fat content, particle size and the degree of heat treatment.

There are two types of soy flour available, full-fat flour and defatted flour, from which the oil has been removed during processing. Textured soy flour is made from defatted soy flour and is compressed and dehydrated. Available in flakes, small strips, chunks or granules, it maintains the texture of foods.