The History and Future of Sustainable Soy in China

11.15.21 | Blog | By:

Despite the economic prosperity the globalised soybean industry hasbrought, it remains a volatile sector often associated with deforestation and biodiversity loss. But the “miracle crop” also has a long history as a direct, and often local, source of protein for humans.

While China has built up global brand recognition for the famous Pu’er fermented tea, connected to its place of origin in the southwestern province of Yunnan, the origin of soybeans is less commonly known.

Part of the challenge of building up soybeans‘ reputation to the level of tea is that domestically produced soybeans and imported soybeans are not adequately recognised as distinct products with starkly different uses in China.

The soybean’s history as nourishing food

Domesticated in China’s northeast region thousands of years ago, most of China’s domestic soybean production is still located there, in Heilongjiang. The province prides itself on its black soil and non-genetically-modified seeds to produce safe, healthy and sustainable soybeans.

Just like its tea leaves, Chinese soybeans have travelled around the world, and are now produced in nearly all parts of the globe. Brazil, the world’s largest exporter, is believed to have got its first batch of soybean seeds in the 1930s directly from the northeast of China which was then known as Manchuria.

China also invented several methods for transforming soybeans into different varieties of tofu, and there have been efforts to introduce these outside of East Asia. In the 1900s and 1910s, Li Shizeng, an educator and early member of the Chinese Nationalist Party, registered patents for tofu-making, a process akin to making cheese and yoghurt, in France. He opened a tofu factory in Paris, which supported Chinese students, some of whom would later become prominent revolutionaries, to serve as a prototype for an industry he believed could help China meet its dietary needs.

In 1917, a Chinese doctor named Yamei Kin was sent by the US Department of Agriculture to her home country to research soybeans as a source of protein to feed American soldiers during World War I. As a celebrity dietitian of her time, Dr Kin introduced soybeans as a healthy and “nutritious alternative to meat, that required fewer natural resources to produce”.

The story of soybeans diverged in China during the “reform and opening-up” period, starting from 1978, when the government endorsed the animal feed sector as key to transitioning China’s consumption towards a more protein-rich diet including meat, poultry and milk. Soybeans were to be used as a protein for animal feed. Demand increased exponentially.

Today, as the largest importer and consumer of soybeans globally, nearly 85% of China’s soybean consumption is hidden in animal feed, mainly imported from Brazil, the US and Argentina. Nevertheless, China is still the fourth-largest producer globally, providing soybeans free of GM (genetic modification) for direct human consumption.

The world largely focuses on the implications of China’s soybean imports, overlooking its domestic production. However, these two sides of the soybean story are interrelated. China’s 14th Five Year Plan, with its focus on high-quality and sustainable development, emphasises the interconnectedness of people’s well-being and environmental protection. With safety and quality assurance becoming the business norm in China and an entry-level requirement for consumers, sustainability and “greening” are becoming the next steps for government and businesses regarding soft commodities such as soybeans. This has implications for both soy as a domestically grown food and imported feed.

Greening China’s domestic soybean production

Up until 2017, China’s northeast region saw a steady decline in the total area planted with soybeans, as farmers could get a better price and subsidies to grow corn. At the same time, they faced lower yields in comparison to other producing countries such as Brazil and the US.

While the sustainability challenges in China’s soy production are rooted in economic viability for farmers, Heilongjiang province already considers its production to be “green” and free of deforestation risk. The region continues to provide soybeans to meet demand for China’s vast varieties of tofu, soy milk and soy sauce – everyday products consumed across the country, comparable to milk and cheese in Europe.

Based on consumer preference, China has maintained a strict GM-free policy for products destined for direct human consumption, with Heilongjiang a GM-free soybean planting region. The province also requires soybean companies that operate both domestic and imported soybean crushing to ensure GM-free varieties are crushed separately.

This has led the industry to adopt its own traceability systems. The system put in place to guarantee GM-free soybeans has provided a foundation for greening the industry. Jiusan Group, a large soybean growing, processing and trading enterprise, launched its green traceability system in 2018. The initiative was updated this year with the utilisation of China’s organic and green certification standards in an effort to provide consumers with health and quality assurance. Details on the initiative, however, remain vague and limited.

With government encouragement, industries in China are increasingly turning to international standards as important benchmarks to guarantee quality, safety and green products. This also enables companies to sell products at a higher price. China’s leading soybean oil brands have built up a reputation for providing green, healthy and safe soybeans, notably sourced from the northeast.

Back in 2014, the state-owned company Sinograin North Agriculture became a pioneer when it implemented an international soy standard, certifying its 24,000 hectares of soybeans under the Round Table for Responsible Soy (RTRS) certification criteria. With support from the China Soybean Industry Association and the Netherlands-based Solidaridad Network, this was the first social undertaking of its kind by a Chinese enterprise, despite the lack of a substantial market demand at that time for responsibly produced soybeans.

RTRS certification guarantees environmental and social responsibility, including zero deforestation and land conversion. The direct benefit to Sinograin came from adhering to Good Agricultural Practices to reduce fertiliser and chemical use, improve soy management and crop rotation, and improve the overall production management system – in turn making higher yields more likely. This drew the interest of neighbouring farmers, who joined Sinograin’s RTRS certification training. Sinograin also sells the RTRS-certified soy credits to European buyers and the physical beans are sold to leading Chinese tofu brands.

This cooperation between Sinograin North and RTRS, a joint effort helping to build up the reputation of Heilongjiang’s soybeans, is an example for soybean producers worldwide. Now, RTRS-certified soy in China is gaining traction and interest from other companies and stakeholders. Heilongjiang soybeans are being sought after not only by domestic companies, but also in Europe, Japan and South Korea, though in small volumes. This is down to the rising demand for plant-based proteins for direct human consumption.

Plant-based proteins give domestic soybeans a boost

While soybeans have been hidden in, and fed into, rising animal protein consumption globally, they are now making a comeback as the plant-based protein for humans they once were. This is also true for China, among its younger generations in particular, who choose to eat less meat for health reasons, and also care about animal protection and the environment.

Multinational meat companies, Chinese start-ups and investors alike are optimistic about the growing plant-based food industry in China. In June 2020, Cargill launched its plant-based brand “PlantEver”, selling plant-based nuggets in KFCs across China and through its e-commerce site. On the packaging, PlantEver’s slogan highlights “protecting the environment and animal welfare”. Unsurprisingly, the plant-based brands in China rely on soybeans sourced from China’s northeast region as the main protein ingredient. Currently, the price of plant-based products is similar to meat products, if not more expensive.

While the trend is unlikely to drastically reduce overall meat consumption within China, the plant-based food industry is growing with the change in consumers’ preferences. Besides the environmental benefits of the industry, the preference of the brands and companies for regional sourcing creates new opportunities to market China’s domestic soybeans as premium produce.

Consumers in the EU and US are also increasingly demanding plant-based proteins from GM-free and deforestation-free soybeans, based on consumer preferences and concern about the environment and deforestation, which governments share. Europe is turning to both regional sourcing and other regions to fulfil these requirements, and is often willing to pay a premium to do so.

Therefore, just as Pu’er tea has built up a high-value reputation for which consumers are willing to pay more, Heilongjiang soybeans now have the opportunity to develop a similar status in plant-based proteins, including tofu. This requires transparent and traceable actions and clear differentiation in the market that demonstrates their high quality and sustainability through brand recognition and eco-labelling.

Sustainability can be the new trend in China’s soy imports

The soybean’s other identity is as an internationally traded commodity. China continues to rely on soybean imports to meet the ever-increasing demand for feed. With the animal husbandry sector, particularly swine, poultry and aquaculture industries driving the demand, these industries are also making efforts to green their supply chains.

China will continue to rely on soybean imports, but will be demanding assurances that they are high-quality and sustainable. Government and financial institutions are recognising deforestation and habitat loss as the greatest risks in the soy industry. COFCO International, the trading arm of COFCO Group, made commitments last year to achieve full traceability of its direct soy suppliers in Brazil by 2023. In 2017, the China Meat Association and WWF together with over 60 member company signatories launched the China Sustainable Meat Declaration calling for concerted actions towards promoting sustainable meat production, trade and consumption.

More recently, the poultry company Sunner Group announced its commitment to achieve zero deforestation in its soybean supply chain, working with CDP, a non-profit helping companies disclose their environmental impact, to develop a plan to achieve this target.

As China’s demand for sustainable soybeans starts to grow, will the rest of the world be ready to meet it?

In response to China’s growing emphasis on sustainability, the US Soy Association, representing the second largest soybean producing country globally after Brazil, has been promoting its own national green production scheme, the Soy Sustainability Assurance Protocol (SSAP), in China. SSAP ensures social and environmental responsibility, including biodiversity protection and zero deforestation, but also good labour conditions. The programme provides an SSAP-verified certificate free of charge for Chinese buyers.

In 2020, Liyang Chen Qiang Special Aquaculture Products Farm in Jiangsu province became the first yellow catfish farm to successfully receive certification. The company uses feed produced only with SSAP-verified soybean products. This sets a good example of soybean producers implementing sustainability and marketing in China across the supply chain. At the same time, Chinese soybean buyers are able to choose US soybeans that are guaranteed deforestation-free.

The world may continue to look at soybeans as just a “commodity”. However, the history and origin of their production has enabled Heilongjiang to differentiate its soybeans and make them increasingly attractive to buyers. While the soy industry continues to rapidly evolve and shape its dual identity – as effective animal feed and nutritious human food – both sides of the story demonstrate a greater emphasis on human well-being coupled with environmental protection to contribute to China’s goals for achieving carbon neutrality and ecological civilisation.

The trends in China undoubtedly have a global impact, creating new and more value-added opportunities for soy producers across the globe. In the complex and fragmented global soy supply chain, producing countries will be at an advantage when they can differentiate soybeans by origin and guarantee they are safe and green. Providing effective market mechanisms, such as using international standards and eco-labelling, will bring added value and draw the link between producers and key markets such as China.

This article was first published on Dialogo Chino.

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