Analysis of China’s soybean planting earnings, comparative study on Chinese and American soybean planting, and policy suggestion

1)Decreasing soybean prices impacted farmers’ earnings
In April, 2019, the average price of domestic soybeans was 3520yuan/ton, down 2.00% year-on-year and 0.17% month-on-month. Deducting the impact of currency, the average price rose by 0.33% from the previous month and fell by 0.74% from the year earlier. The nominal price of soybeans in April dropped by 35% from the highest level in September, 2012.  
In the crop year from September 2018 to April 2019, the accumulative average price registered at 3583yuan/ton, down 4.53% from the same period last year. Excluding the impact of currency value, the price dropped by 4.82% year-on-year, which fell by 23.56% from the highest level in 2012/13.
From the perspective of prices for the calendar years after 2011, the prices saw a growth of 17% in 2012 and a growth of 1.45% in 2017, and the prices in other years all declined to varying degrees. In the first four months of 2019, the average price of soybeans continued to drop to 3553yuan/ton, a year-on-year decline of 2.80%.
According to the prices above, we calculate that farmers’ selling prices of soybeans averaged 3595yuan/ton, and their expected prices for 2019 are 3494yuan/ton. The cost-profit ratios of soybean planting were at historical low levels in recent two years.
Based on BOABC’s monitoring data and historical data in the major producing areas, it’s estimated that per unit area yield of soybeans would be 2079kg/hectares in the main producing areas in 2018 and will be 2083kg/hectare in the country in 2019; the earnings of planting soybeans would be 7721yuan/hectare in 2018 and will be 7544yuan/hectare in 2019.
In terms of production cost, taking the costs for fertilizer, diesel, pesticides, film and others into account, the material and service costs were 3385yuan/hectare in 2018, a year-on-year growth of 11.91%. The increase in refined oil prices was the main driving force for the growth of costs. In addition, labor cost was 3399yuan/hectare, up 4.99% from the year earlier; the land cost was 3393yuan/hectare, down 9.98% year-on-year.
Comprehensively considering various costs and incomes, farmers suffered a loss of 2457yuan/hectare for planting soybeans in 2018, and the cost-profit ratio was -24.14%. Chinese farmers have seen losses for five successive years in soybean planting. According to the current prices of commodities and services, planting soybeans will gain a net profit of -2376yuan/hectare in 2019, reaching a cost-profit ratio of -23.95%.
On the basis of the current costs, earnings, and residents’ income, each farmer needs to plant 4.81 hectares of soybeans to reach the average income level of rural residents and each household need to operate 18.7 hectares of soybeans to achieve the average income level of rural households in 2018. Soybean production in 2018 can provide jobs for 1.83 million farmers. To reach the average income level of urban residents, a labor needs to plant 12.8 hectares of soybeans; to achieve the average of urban households, a household needs to plant 50 hectares of soybeans. Soybean planting industry can only allow 688,000 people to achieve the average income level of urban inhabitants.
2) Analysis of the impact of oil prices on soybean industry
Soybean production cost directly or indirectly related to the prices of petroleum and refined oil was 2491yuan/hectare in China in 2018, a year-on-year growth of 14.88%, hitting a record high. It accounted for 73.58% of the total cost of materials and services , a historical high level. Low proportion of petroleum and refined oil related cost in 2014 brought about the best earnings of China’s agriculture, resulting in good economic benefits in China.
International prices of refined oil rose somewhat in 2018, and only were 0.51% of that in China. If the prices in China dropped to the international levels, the cost of materials and services for planting soybeans will fall by 1009yuan/hectare to 1903yuan/hectare, the total production cost of soybeans will be 8696yuan/hectare, the loss will drop to 975yuan/hectare, and the cost-profit ratio will rise to -11.21%, which is much higher than the current level of -24.14%.
If domestic prices of refined oil drop to or lower than the international levels, each farmer needs to plant 3.22 hectares of soybeans and 8.60 hectares to reach the average income levels of rural residents and urban residents in 2018; a household needs to plant 12.58 hectares of soybeans to reach the average income level of rural households and 33.53 hectares of soybeans to achieve the average income level of urban households. In that case, China’s soybean planting industry in 2018 would provide jobs for 2.73 million people.
3) Changes in the price ratio between soybeans and corn  
In April, the price ratio between soybeans and corn averaged 1.93 in China, down 0.35% from the previous month and 0.18% from the year earlier. In the crop year of 2018/2019, the cumulative price ratio averaged 1.92, decreasing by 8.44% year-on-year. The price ratio between soybeans and corn has declined sharply for two successive years.
4) Comparisons between the selling prices of imported soybeans and the import prices
As for imported soybeans, the average port selling price of soybeans imported was 3141yuan/ton in April, decreasing by 7.97% from the previous month and 7.01% from the year before. Deducting the impact of currency value, the price actually fell by 7.46% month-on-month and 5.75% year-on-year. The price gap between imported soybeans and home-grown soybeans rose to 379yuan/ton, which was 12.08% of the price of imported soybeans.
From the perspective of the import cost, the import cost of soybeans was 2851yuan/ton in April, declining by 2.40% month-on-month and 15.70% year-on-year. It dropped sharply for four successive months. In coastal areas, the selling prices of imported soybeans were 290-535yuan/ton lower compared with the import prices.
In the crop year of 2018/2019, the import cost average 3897yuan/ton, down 1.35% year-on-year, and the gap between the selling price of imported soybeans and the import price was 134yuan/ton, a 1.3 times growth from the previous year. In the first four months of 2019, the import cost of soybeans was 3301yuan/ton, a year-on-year increase of 3.14%.
5) Comparison of soybean planting industry between China and the US and historical changes
It’s estimated that the selling prices of soybeans by American farmers were 2114yuan/ton in 2018 and will be 2180yuan/ton in 2019.
In 2018, per unit area yield of soybeans was 3897kg/hectare in the US, while it was 2064kg/hectare in China, the former is 1.9 times of the latter. The gap in productivity level between the US and China is enlarging significantly. As for the production cost of soybeans, it was 6268yuan/hectare in the US, about 70% of that in China. Considering the differences in per unit area yield and production cost between the US and China, China’s production cost of soybeans per unit weight was more than three times of that of the US in 2018.