China's rising needs to bring soy to new frontiers

Standard Chartered raised the bar further on China's long-term soybean imports, saying they will double by the end of the decade ?and potentially spurring?Africa to join the ranks of major exporters of the oilseed.

China will require soybean imports of 112m tonnes of soybeans by 2020, the bank said, a jump from 56.0m tonnes in 2011-12, on US Department of Agriculture estimates and higher than forecasts from other analysts.

The USDA projects China's soybean imports reaching 87.0m tonnes in 2020-21, while Macquarie last week pegged the figure at about 100m tonnes.

"We disagree with the view that China's soy demand has peaked," Standard Chartered said.

Protein vs carbs

Demand for soybeans is being spurred by growth in demand for pork, from pigs fed on soymeal, which has further to run despite Chinese consumers' average daily calorie intake reaching the Asian average of just under 3,000 calories per person.

"Where those calories come from is all-important," the bank said, noting that Chinese rely on carbohydrates for 61%, compared with 53% in the developed world.

"Given that half the population currently lives in rural areas, and that urban incomes are two to three times higher than rural incomes, protein consumption should continue to rise to provide a greater share of calories."

Growing these soybeans will require an extra 40m hectares an area bigger than Germany - assuming an average yield of 2.9 tonnes per hectare, and that China's output stays at around current levels.

Farmland sources

"The good news is that land is not in short supply, at least outside of China," StanChart said, noting World Bank estimated that Brazil could near-double the 25m hectares it currently puts down to soybeans, with Argentina boasting potential for an extra 10m hectares.

"Latin America has some 94m hectares of uncultivated land located within six hours of market that could be farmed for a variety of crops," the bank said, quoting its own research and that of CEIC.

However, that figure was slightly exceeded by sub-Saharan Africa's potential of which 39m hectares was deemed suitable for soybeans.

"While Brazilian and Argentine farmers are now active throughout Latin America, few have made the leap to Africa.

"If China's hungry pigs are to be fed, though, Africa will become a bigger strategic focus for Asia's agri-industry."

Soyoil vs soymeal

The comments came in a report in which the bank forecast Chicago soybean futures averaging $14.80 a bushel in 2012, up from $13.18 a bushel last year, reflecting the need to ration supplies following the drought-hit South American harvest.

It recommended a trade of a short bet on soyoil while going long on soymeal futures.

"This is because we expect tightness in the soybean market to be disproportionately bullish for meal relative to oil, since soymeal accounts for a much larger share of the overall animal meal market, 60%, than oil's share of the vegetable oil market, 30%."

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