According to a recently published report by IndexBox Marketing, China is the largest consumer of soybeans in the world. At the same time, 88% of China’s total consumption in 2015 accounted for imports. In 2016, according to Oil World data, the volume of imports may be reduced in the current year by 4% for the first time in 15 years, under the pressure of high yields in China and accumulated domestic production inventory. Nevertheless, the dependence on imports of soybeans will remain strong, despite a possible reduction in the share of imports in consumption by 2-3 percentage points, down to 85%.
The volume of soybean consumption in China in 2015 amounted to 93.3 million tons, accounting for 31% of the world’s total consumption, which was equal to 298 million tons. The U.S. took second place in this ranking with a share of 20%, followed by Argentina (13%), Brazil (11%), and other countries.
China was the fastest-growing market among the leaders in consumption, with an average annual rate of consumption growth of + 8.5% from 2008 to 2015, while the growth rate of global soybean consumption amounted to only +4.1% over the same period. Due to the high rates of consumption, China’s share of consumption in the global market has grown from 23% in 2008 to 31% in 2015.
The average annual growth rate of soybean consumption in the U.S. amounted to +3.7% from 2008 to 2015, which was significantly below China’s level. There also were notable differences between these two leading countries in terms of production figures, imports, and exports. Thus, China imports a significant amount of products (with shipment volume amounting to 81.7 million tons in 2015), while the United States, on the other hand, exported 48.2 million tons in 2015.
Thus, the large amount of soybean consumption is common to these countries, but they have differences in the intensity of consumption of the product, and carry a variety of opportunities for both internal and external suppliers. For example, China and other key consumer countries on the soybean market can be assessed from the point of view of market development opportunities, using the following parameters:
• ability of countries to meet domestic demand for soybeans (the share of imports in total consumption);
• the total current demand (consumption on the market);
• prospects for the demand expansion (per capita consumption).
The graph shows the top 10 countries in terms of soybean consumption in 2015 (the volume of the market in the countries is proportional to the size of the circles). The horizontal axis is marked with per capita rate of consumption, with the share of imports shown on the vertical axis. World averages for both indicators divide the graph into 4 quadrants.
First quadrant includes countries that depend on imports, with the share of imports in these countries being higher than the global average of 41%. At the same time, the average per capita consumption rate of soybeans is below the world’s average, which indicates the potential for market growth. China is located in this quadrant, having a rapid average annual growth rate of consumption. It is likely that this trend will continue, but experts note the strengthening in domestic production combined with a decrease in imports in 2016. If imports reduce further while production volume continues to increase along with consumption growth, China could move to the third quadrant, where self-sufficient countries in terms of soybeans consumption are located.
Russia and Mexico are also placed in the first quadrant, as they are dependent on imports, much like China. In 2015, China imported 81.7 million tons of soybeans, accounting for 68% of global imports. Mexico is in second place with a 3% share, while Russia accounts for 2%. In addition, a number of European countries, namely the Netherlands, Germany, Spain, and Italy, are among the biggest importers. They are not displayed in the graph with quadrants due to their lower volume of consumption, but they have similar characteristics, such as the greater dependence on imports of soybeans at a relatively low per capita consumption.
Due to high shares of imports in total consumption, countries in the first quadrant are of great interest from the standpoint of foreign suppliers of soybeans.
In the case of a simultaneous increase in domestic production and imports, China could move to the second quadrant. This quadrant has great prospects for both importers and domestic suppliers, which is the result of a high demand. At this point, the second quadrant does not have any major consumers of soybeans.
The third quadrant houses the countries for which soybeans are a traditional product to a large extent. These countries have well-developed domestic production, which satisfies the majority of the domestic demand. Their average per capita consumption figures are higher than the global average. These countries include the U.S., Brazil, Argentina, Paraguay, Bolivia, and Ukraine. The countries in the third quadrant are the largest producers and some of the major suppliers of soybeans in the world.
The U.S. is the largest producer of soybeans, accounting for 108.1 million tons, or 36% of the world’s total volume of production in 2015. Brazil is next in line with a 29% share, followed by Argentina with 16%. Together, the countries of the third quadrant account for 87% of the world’s output, and for more than 95% of global exports.
High volumes of soybean production in the countries of the third quadrant are in many ways the result of high fertility of the areas of cultivation. Thus, the yield of soybeans in the U.S., Brazil, Paraguay, and Argentina is almost double the world average. China is also noticeably lagging in terms of productivity, compared to the high yield values from these countries.
Countries in the third quadrant have low opportunities for foreign suppliers due to their developed soybean production, which satisfies the domestic demand and leaves room for exports.
The third quadrant presents the countries with lagging indices of per capita consumption. The bulk of consumption in this category is provided by domestic production. Countries in this quadrant are interesting because of their prospects in terms of market development, as there is an opportunity for sale of a large volume of products for both the foreign and domestic suppliers. As a result, a country in the fourth quadrant can move either to the first quadrant with the growth of imports, or to the third, if there are favorable conditions for the expansion of domestic production. India, one of the countries in this quadrant, has great potential for market development. However, due to a succession of poor harvests, India is showing a negative trend of consumption (average annual growth rate of -1.8% from 2008 to 2015).
This positioning allows us to describe the current situation of the players in the soybean market as well as to predict their further development. China, the largest global consumer at the moment, is in the quadrant of import-dependent countries. Given its large share of imports, China has minimal chances of moving to the quadrant of “self-sufficient” and export-oriented countries. The trend of substitution of imports in 2016 may be short-lived, having occurred due to the oversupplying of the market.