China’s Hunger for Soy to Exceed Global Supply

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China’s Hunger for Soy to Exceed Global Supply

By Tim Maverick, Staff Writer

Investors by now are well aware of China’s hunger for all sorts of commodities, including food.

Nonetheless, recent research from the agribusiness consultancy LMC International revealed some shocking information.

LMC’s senior economist Julian McGill, as reported by Agrimoney, said that the growing pace of China’s demand for soybeans will result in the country “trying to import more soybeans than the major producing countries are exporting.”

The research forecast’s Chinese import demand to reach 180 million tons of soybeans by 2024. That’s more than the soy production of the biggest producers – United States, Brazil, and Argentina – combined!

It doesn’t take an investing genius to realize this supply-demand situation will open up new opportunities for investors.

The Chinese Dinner Plate

So what is behind China’s insatiable appetite for soy? Well it’s certainly not just soy sauce.

The reason for increased demand is the rising consumption of soybean meal used to feed livestock.

You see, China’s huge population is steadily increasing its wealth and socioeconomic standing and thus wants to eat better. That means there’s more demand for meat, poultry, and fish on the average Chinese dinner plate.

China’s pork production has increased by 38% since 2000, and the country now houses over half of the world’s pig population. In fact, the pig population there is twice the population of the United States! And in 2013, China produced 55 million metric tons (mt) of pork, five times the amount produced in the United States. Hogs consumer 30% of China’s overall livestock feed.

On top of pork, poultry constitutes about 40% of China’s animal feed and production reached 18 million mt last year. Farmed fish accounts for 30% of the feed and produced 45 million mt in 2013.

Feeding the Investment

One good way to take advantage of this trend is to purchase soymeal futures traded on the Chicago Mercantile Exchange (CME). And for those more comfortable with the stock market, a good choice is an exchange-traded fund (ETF) that holds CME futures on soybeans.

One such ETF is the Teucrium Soybean Fund (SOYB). Its portfolio consists of three differently dated CME soybean futures contracts.

It’s down on the year, though, thanks to a bountiful soybean crop in the Unites States. Yet, unlike most commodity ETFs this year, SOYB has actually seen an influx of funds.

Part of the explanation for that, of course, is the steadily rising Chinese demand, giving soybeans the fastest growing demand profile among all commodities.

And “the chase” continues,

Tim Maverick

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By Tim Maverick