BOFIT Viikkokatsaus / BOFIT Weekly 2018/15

China buys two-thirds of the soybeans sold on the global market. Soy meets large share of the protein feed input in Chinese meat production. China's domestic production can only cover a small fraction of soy demand, however. China's current 2016–2020 five-year plan calls for reduction the country's dependence on imported soy by encouraging farmers replace maize with soybeans. By 2020, the area under cultivation for maize should decline to 13 % below the 2015 level, while soybean acreage should rise by 40 % from that level.

Overproduction of maize has been a problem in China. The subsidised guaranteed maize price was earlier so high that it encouraged farmers to grow maize whether or not there was any demand for it. Chinese soybean farming is today largely supported through farm subsidies. Also soy import tariffs are speculated to be another way of encouraging soy farming as it would raise prices for domestic producers. Over a third of China's soybean imports come from the United States. With trade tensions flaring, China has threatened to impose 25 % tariffs on US-produced soybeans. Import restrictions imposed on soybeans, however, would impact Chinese meat production and fuel inflation. Moreover, this huge soy amount would be difficult to cover with imports from other countries. Chinese firms, not multinationals, are today the main soy importers to China.

Soybean production rose by 12 % in 2017, while maize production declined by about 2 %. The volume of soybean imports, however, grew by about 14 %, while maize imports declined by nearly 11 %. The threat of a trade war has confused the outlook of the year and is likely to affect prices of soybeans and maize.

While most guaranteed prices for agricultural products have been abolished, they remain in place for wheat and rice.