Farm Horizons, June 2012

Thoughts on China

By Myron Oftedahl, Farm Business Management Instructor, South Central College

Twenty-eight other Minnesota farmers and myself departed Minneapolis for Shanghai, China March 27 on a MN Soybean Research & Promotion Council See for Yourself Trip. The purpose of the trip was to evaluate if the soybean checkoff dollars were being spent wisely.

This trip was through the International Marketing Committee, so the focus was dollars spent on international marketing. This includes the dollars that are spent to support our marketing partners, such as US Soybean Export Council and the US Meat Export Council.

When we landed in Shanghai and began to travel through the city towards the hotel we were struck with the number of p,eople in China. For a country that is about the same size as the US, there are over three times as many people, with a population of more than one billion. This population is growing at about 56 million people per year, even though China has a one-child policy in place.

During the time that we were in China, we toured soybean crush plants, a feed mill, a hog operation, a soy food facility, and local retail and wholesale markets, both government-owned and privately owned.

Many of the businesses stated that their five- or 10-year plan was to double the size of the business; in one case, they stated that the expansion goal was 10 times larger than the present size.

Many of the large-scale farming operations and businesses were started in the early 1990s, when China began the effort to be self- sufficient for food supply. As in the US, many of the large-scale livestock operations are vertically integrated where the feed mill owns the hogs, or the broiler raiser owns the wholesale market. Even though these large scale operations were in place, 52 percent of the hogs marketed were raised on small farms selling less than 15 hogs per year.

As we traveled within the cities and the adjoining countryside, it was apparent that the highway infrastructure was in very good shape. At least a portion of the cost of building and maintaining the roads was covered by the use of toll booths. We were in coastal cities, where the rivers play an important role in transporting commodities such as grain, gravel, fertilizer, and steel.

The mixture of new and old was very evident on the city streets with the mix of bicycles, scooters, and cars. In the industry setting, the same mix was evident. An example of this was at the soybean crush plant. The entire crush operation was controlled by one employee in the control room, but the soybean meal that was produced was all bagged into 60 kg bags (about 130 pounds) and loaded into trucks by hand. Labor was a major concern for the businesses in China.

Food self-sufficiency is a priority for the Chinese government. Food safety is not necessarily a priority, but more emphasis is being placed on food safety. In all of the retail markets, the meat was cut with a cleaver on a wood block.

The Chinese are used to buying groceries every day because they do not have room for a freezer or space to store much food. The frozen food that we saw in the wholesale market went into the restaurant and hotel trade.

Their meats of choice are pork and chicken. There is an effort to get imported beef into China, but this has been very limited. The beef that gets into China comes through the black markets, primarily from Vietnam and Korea. Beef is not a large part of the Chinese diet, less than 4 pounds per capita. Most of the pork cuts that are imported are secondary cuts to us, the front shoulder, hocks and feet, ears, snout, and other parts. Because the food market is based on fresh meat, it has been a challenge to get fresh US pork into China. The US Meat Export Council has been working with the Chinese government to streamline the process for importing fresh pork and clearing customs, but so far, the time to clear customs has been very inconsistent, ranging from one day to 20 days.

So why go to China? Because China is a huge potential market for Minnesota soybeans, Last year, China purchased about 881 million bushels of American soybeans. It has been estimated that the potential is 2.4 billion bushels of American soybeans. That translates to about 72 percent of the US soybean crop. So far, China only allows imported soybeans to be used for animal feed. Food-grade soybeans for producing products such as tofu and soy sauce are sourced domestically. It was estimated that China grows about 15 million acres of soybeans, with about 10 million acres of those soybeans being used for human consumption.

The future of exporting US soybeans into China is enormous due to the following reasons; population expansion, livestock expansion, loss of farmland, and increases in family incomes.

I would very much like to thank the Minnesota Soybean Research & Promotion Council for the opportunity to participate in this trip. It was very educational and interesting. If you have any questions, give me a call. I would be glad to talk to you.

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