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NEWS ANALYSIS

China's appetite for soybeans could be its soft underbelly in trade war

Xiaowusili, China

FOR all its economic might, China hasn't been able to solve a crucial problem.

Soybeans. It just cannot grow enough of them.

That could blunt the impact of one of the biggest weapons the country wields in a trade fight with the United States.

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Beijing placed a 25 per cent tariff on US soybeans last week in retaliation for the Trump administration's levies on Chinese-made goods. Last year, soy growers in the US sold nearly one third of their harvest to China. In dollar terms, only airplanes are a more significant US export to China, the world's second-largest economy.

Still, soy-producing states like Iowa and Illinois might not feel the tariffs' impact right away. China buys so much soy from the US - US$14 billion last year - that it can hardly switch to new suppliers overnight.

Foreign-grown soybeans are a key source both of low-cost protein for feeding livestock and of cooking oil for Chinese kitchens.

China is pressing its own farmers to grow more. But the sums are daunting, and the obstacles formidable.

Just ask Cao Xiumin. For the past 16 years, she has been growing corn and soybeans on a couple of acres near Xiaowusili, a village of about 600 people on China's north-eastern rim.

Overall, she is not producing much more today than she was a decade ago. Her fields are small and not irrigated. The new, supposedly higher-yielding seeds promoted by the government are not much better than the older varieties, she says.

Farm goods could be a big weakness for China should the trade conflict with the US turn into an all-out brawl.

China's increasingly wealthy people want more and better food on their plates. But the country's farms are generally too small and underdeveloped to keep up.

Nearly 90 per cent of the soybeans China consumed last year came from overseas - more than 100 million tonnes in total. (Mexico, the world's No 2 importer, bought just 5 million tons.)

Replacing even a chunk of those with homegrown beans may prove as herculean a task for China as weaning itself from US microchips.

This spring, after the Chinese government first proposed retaliatory tariffs on US soybeans, it got busy trying to dampen the potential blow to 1.4 billion stomachs.

To increase the availability of other types of animal feed, China's customs authority removed inspection requirements on a variety of agricultural byproducts, including peanut meal, cottonseed meal and rapeseed meal.

Farmers in Heilongjiang, China's top soybean-producing province, also got an order from authorities: Grow more soybeans. Immediately.

As an incentive, the provincial government offered generous subsidies to farmers both for growing soybeans and for switching their fields to soy from corn.

Word of the new subsidies spread quickly on the social media app WeChat. And soon, many farmers were returning corn seeds and fertiliser they had already bought and planting soy instead.

Still, China would need to dedicate a huge fraction of the entire nation's farmland - between a quarter and a third, by various estimates - to soy if it wanted to be self-sufficient.

US farmers could still take a sizeable hit in the long run if China's tariffs prompt Brazil and other suppliers to expand their soy acreage, or if China bankrolls cultivation outside its borders. Many people from Heilongjiang are already growing soybeans across the Amur River in the Russian Far East, where land is cheap and plentiful.

To reduce its dependence on US soy, Beijing could also try to squeeze more beans out of each acre at home. But farmers in Heilongjiang acknowledge they are a long way from being as productive as farmers in the United States, where agriculture is more mechanised and genetic modification is embraced.

China allows imports of genetically engineered crops, but Heilongjiang forbids farmers to grow them. Many people here harbour deep doubts about such products' safety, both for people and for the land.

"I wouldn't grow them even if the government allowed it," said Gai Yongfeng, head of the Jiaxing farm cooperative in Dawusili. "They're bad for the soil. After you've grown them somewhere, nothing else will grow there. That's what everyone says."

Some growers are trying to modernise in other ways.

Hou Wenlin started the Linfeng Modern Agricultural Speciality Cooperative in 2014. He does not believe China will be able to replace soy imports entirely. "There's no point," Mr Hou said. "It just can't be done."

He does, however, believe that China can grow soybeans more scientifically. In one of his cooperative's fields, the soy grows in neat rows that are spaced farther apart to keep the plants at the right temperature and moisture. Each season, he plants a number of different types of seeds to understand how each performs. He has two drones for spraying pesticide.

Modern farming is expensive, however. And in Mr Hou's case, it involves a secret weapon: US technology.

In front of the cooperative's office is a yard full of bright-green John Deere farm machines, which Mr Hou buys with the help of government subsidies. Chinese machinery is cheaper but more prone to breakdowns, he says.

Even some of the fertiliser he uses comes from the United States.

The Chinese equivalents are better now than they used to be. Earlier, though, there was something that was commonly said, according to Mr Hou, among farmers around here who knew the chemical name of one of the most widely used plant foods: "We rely first on the heavens," the saying went. "We rely second on American diammonium phosphate." NYTIMES