Location is Key to China's Soybean Crush – The Impact of Reshaping the Hog Industry

China’s pork consumption growth is expected to further slow down in the next three years. Meanwhile, pork production is being reshaped, creating supply deficits and surpluses in different regions.

Rabobank expects that China’s hog farming capacity will continuously move from coastal areas towards inland areas. Such geographic shifts will change regional soymeal demand.

China’s soybean crushing industry is already facing serious overcapacity. In general, the existing capacity is expected to fully meet national soymeal demand, even when taking the future growth into consideration.

A careful soybean crush capacity expansion will be crucial:

Northern and southern China: Serious overcapacity is calling for industry consolidation instead of expansion. Inland areas (such as north-western, south-western, and central China): The crushing volume will stay small, due to the logistical disadvantage those regions face. Coastal areas: Regional soymeal consumption growth will continue to be fulfilled by crushers from coastal areas that ship the meal into the regional destination markets.

Attractive investment opportunities in north-eastern and eastern China remain. Having a presence in key north-eastern ports could offer a long-term cost advantage within the region. And crushers located in the eastern ports, who are able to ship more soymeal to upper and middle reaches of the Yangtze River, can cater to the growing demands in central and south-western China.