China’s Hunger For Soybeans

Via Fast Company, an interesting report on how China’s desperate efforts to source soybeans from all over the world is explained by the country’s fear of running out of water:

China approached Peru and Brazil with an extraordinarily ambitious proposition several years ago. It would build a 3,000-mile railroad from the western coast of Peru to the eastern coast of Brazil to handle commerce and trade from the interior of South America to China.

If successful, the massive infrastructure project would expand Peru’s trade options and give Brazil’s soybean farmers a cheaper, more direct route to China than the increasingly expensive shipping through the Panama Canal.

The benefits for China? China certainly doesn’t talk about the connections between a railroad that snakes its way across South America and looming problems in northern China that could cause immense, near-term harm not only to its own population but to neighbors and world superpowers like the U.S.

But the connections are there–in economic forecasts about the trade-offs China must now make over the types of food it grows inside its own borders and those it must import, or in business sector reports about agricultural and food companies it’s buying to ensure a countrywide famine doesn’t disrupt the tight political, financial leadership that controls China’s position in the global community.

Political leaders and business interests in all three countries wanted the railroad, but it ran immediately into environmental activist headwinds. Since all proposed routes cut a swath through the Amazon to reach Peru’s coastline, activists argued, rightly, that the project would disrupt the rainforest’s delicate ecosystem and likely accelerate deforestation. Political chaos in Brazil additionally delayed the project.Though authorities in both countries finally signed off on plans, the Amazon railroad is still in the planning stages. Will it ever be built? No one should doubt China’s ability to succeed where other countries might fail. They’ve shown considerable resolve in bringing massive infrastructure projects to fruition. But, for now, soybean producers in Brazil, Argentina, Bolivia, and Paraguay continue to ship via existing shipping and rail routes.

The much bigger question is why China was willing to go to such extraordinary lengths. Yes, such a railroad through the heart of the Amazon would shorten times for soybean shipping between Brazil and mainland China, and bypassing the Panama Canal to ship across South America and then from a Peruvian port would likely save the Chinese money. But why the pressing need? Are soybeans a genuinely strategic resource, requiring China to secure their continued supply? 

The answer, in a word, is yes. Soybeans have become quite important to China. They are the answer–for now–to a looming crisis building for 20 years that now threatens the fabric of the Chinese economy in the near future.

Virtually all the world’s soybeans–a crop used for food products but mostly as the basis of feed for livestock like pigs–come from the U.S., Brazil, and Argentina. China used to grow its own soybeans–the soybean, in fact, originated in eastern China–but that has changed radically in just the past decade or so. Soybean meal is the world’s largest source of protein feed, consumed indirectly by humans through products like chicken, pork, and beef.

In 1995, China grew their own soybeans for use in food and livestock feed and imported only 18 million bushels. However, today it imports more than 2.7 billion bushels–quite a change from 18 million 20 years ago–making China the world’s largest importer of soybeans.

Sixty percent of all soybeans grown worldwide are now exported to China, with 5% to 8% growth per year and no signs of slowing down. Experts predict this insatiable appetite could outstrip the entire global production of soybeans–including in the U.S. and Brazil–within a decade. This partially explains why China is willing to build a railroad through the Amazon. It needs to buy almost every soybean grown in South America.

The American, Argentine, and Brazilian economies have all benefited from this strong, consistent demand in soybean exports to China. It’s why trade disruptions (like a U.S.-China trade war threatened by President Trump) could cause serious harm to economies at both ends of the trading relationship. About half of U.S. soybean exports go to China, which is roughly one-third of the U.S. soybean crop.

Why is China buying up the global soybean market? They have no choice. The steadily growing demand is largely driven by expanding hog and poultry operations that use soymeal for feed, indirectly feeding China’s surging population. Also, the country’s middle class, which demands meat products to match Western diets, will double within a decade.

But the serious tradeoff China was forced to make in recent years explains the purchase of all the world’s soybeans now. This underlying threat that its political leaders don’t talk about is what actually drives the relentless pursuit of soybean imports.

In northern China, where soybeans were once traditionally grown, water tables are dropping at a rate of up to 10 feet a year. Northern China (and parts of the west) is running out of water. The remaining water in rivers and streams is so polluted that the government has a daunting sanitization task. Add the effects of desertification–drifting sands covering cropland at the rate of 1,400 square miles (that’s like adding a new desert larger than Rhode Island) every year–and it’s nearly impossible to grow soybeans in northern China.

To produce just one ton of soybeans, it takes 1,500 tons of water. China’s ambitious plans to divert rivers from the south to irrigate the north are in trouble now for ecological and political reasons. China is facing a massive agricultural and water challenge in the north right now, and soybeans are at the center of that story. By importing most of the world’s soybeans, which use water from other parts of the planet, China is effectively importing a sixth of its water needs out of necessity.

China now finds itself squarely in the crosshairs of a wicked dilemma driven by the very real, twin threats of Earth’s changing climate and the overuse that has polluted and drained its existing water supplies. For now, the country is solving its food problems exacerbated by extreme water scarcity issues in the north by forging massive trade deals for soybeans and even livestock in places like the U.S. and Brazil.

In 2013 a Chinese firm bought Smithfield Farms in Virginia–the world’s largest pork producer–as a hedge against its food insecurity threats. Such a purchase illustrates the strategic moves China must make as encroaching deserts in the north diminish its ability to feed its own population. Some experts fear the Gobi Desert could swallow up the north and merge with other major desert regions. That, in turn, would put enormous pressure on China’s leaders to seek other ways to obtain fresh water from the Himalayas, causing harm to Tibet and other countries.

Water is now China’s “worst” problem “because of the scarcity, and because of its pollution,” Wang Tao from the Carnegie-Tsinghua Center in Beijing told The Economist. Beijing has the same water scarcity issues that confront Saudi Arabia, Yemen, Syria, and others today.

China’s former water minister, Wang Shucheng, once said, “To fight for every drop of water or die: that is the challenge facing China.” Desertification and current rates of water extraction meant many cities in northern China–including Beijing, home to more than 20 million–would run out of water in 15 years, he added.

Shucheng made that prediction in 2005–13 years ago.

This entry was posted on Saturday, September 29th, 2018 at 6:36 pm and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  You can leave a response, or trackback from your own site. 

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Seeds Of A Revolution is committed to defining the disruptive geopolitics of the global Farms Race.  Due to the convergence of a growing world population, increased water scarcity, and a decrease in arable land & nutrient-rich soil, a spike of international investment interest in agricultural is inevitable and apt to bring a heretofore domestic industry into a truly global realm.  Whether this transition involves global land leases or acquisitions, the fundamental need for food & the protectionist feelings this need can give rise to is highly likely to cause such transactions to move quickly into the geopolitical realm.  It is this disruptive change, and the potential for a global farms race, that Seeds Of A Revolution tracks, analyzes, and forecasts.

Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has long held a keen interest in natural resource policy and the geopolitical implications of anticipated stresses in the areas of freshwater scarcity, biodiversity reserves & parks, and farm land.  Monty has lived, worked, and traveled in more than forty countries spanning Africa, China, western Europe, the Middle East, South America, and Southeast & Central Asia, and his personal interests comprise economic development, policy, investment, technology, natural resources, and the environment, with a particular focus on globalization’s impact upon these subject areas.  Monty writes about freshwater scarcity issues at and frontier investment markets at