BEIJING, May 31 (Reuters) - China's flagship food group

COFCO International landed its first cargo of deforestation-free

soybeans for domestic use on Friday, marking what industry

players say is a milestone for a country that has prioritised

price over sustainability in its farm imports.

China is a top buyer of agricultural goods, including

soybeans and beef, which are drivers of global deforestation,

but has lagged western peers in demanding that produce including

palm oil not be sourced from land linked to deforestation or

conversion of natural habitats.

That is slowly changing, with state-run COFCO International

as well as China Mengniu Dairy Company ( CIADF ) and Inner

Mongolia Yili Industrial Group Co Ltd in the past

year asking suppliers and consultants for sustainable soybeans,

traders and sustainability experts told Reuters.

The volumes are tiny in the context of China's overall

buying but the implications of the greener sourcing are

significant, given China's voracious appetite for agricultural

goods, even as it seeks to cut its dependence on imports.

The participation of COFCO, which brought in Friday's cargo

at Tianjin port for Mengniu's subsidiary Modern Farming Group,

also sends a signal to other buyers of Beijing's intent.

"There is a noticeable shift in buying trends among Chinese

buyers towards more sustainable and environmentally friendly

products," a Singapore-based broker said, declining to be named

due to business confidentiality.

Some Chinese companies have been "aggressively" asking for

deforestation-free soybeans and carbon-neutral vegetable oil

since last year, a manager with a global trading firm said.

Friday's 50,000 metric ton cargo of Brazilian soybeans worth

$30 million had a deforestation and conversion-free (DCF) clause

for the first time for an order of the oilseed from China.

"Our industry must take action to help strengthen our food

systems (and) promote sustainable agriculture practices that

protect our climate and environment," COFCO International Chief

Executive Wei Dong said in a statement.

The shipment is a pilot project driven by the World Economic

Forum's Tropical Rainforest Alliance to curb commodity

export-driven deforestation. Its executive director, Jack Hurd,

said COFCO's participation will stimulate more Chinese demand

for sustainable products.

POLICY PUSH

While sustainability efforts in the West have often been

consumer driven, China's shift is triggered by policy signals as

well as investor pressure.

In 2020, President Xi Jinping pledged that China, the

world's biggest polluter, will achieve peak emissions by 2030

and carbon neutrality by 2060. In an agreement last year, China

and the United States said they will cooperate to curb forest

loss.

New domestic stock exchange rules requiring companies to

disclose ESG (environmental, social and governance) information

from 2026 have added pressure, while the upcoming European Union

Regulation on Deforestation-Free Products (EUDR) provides extra

impetus, analysts said.

Mengniu in 2023 committed to a zero-deforestation supply

chain by 2030 and joined industry group the Roundtable on

Sustainable Palm Oil (RSPO) this year. Yili has a similar target

for soy, palm oil, pulp and paper supply, and has said it will

raise annual purchases of RSPO-certified palm oil by 50 metric

tons from 2024 to achieve 650 metric tons by 2030.

A palm oil producer in Indonesia said selling to China will

soon require higher standards. "They are paying more attention

to sustainability ... unlike in the past when price was the only

factor."

COFCO, meanwhile, has a 2025 target for a zero-deforestation

soybean supply chain in ecologically sensitive areas in Latin

America, including the Amazon, and has plans for sustainable

palm oil and coffee supply chains.

In January, COFCO International signed a memorandum of

understanding with COFCO Group's China Shengmu Organic Milk Ltd

to supply 12,000 tons of DCF soybeans from Brazil,

with an agreement to gradually increase the volume.

RSPO China's head, Fang Lifeng, said China's demand for

certified sustainable palm oil, originally driven by

multinationals such as L'Oreal and Unilever ( UL ),

are now being led by local firms.

Still, the demand is a small fraction of China's imports,

which last year included 4.3 million tons of palm oil and 99.4

million tons of soybeans.

Cost remains a deterrent. DCF soybeans can cost $2-$10 more

per ton, while RSPO-certified oil can cost upwards of $15 more.

A Singapore-based trader at an international trading company

that runs soybean processing plants in China said volumes will

not even account for 1% of imports.

"We don't see significant volumes coming in," the trader

said, adding that pressure from trade financiers could help the

push towards sustainable sourcing.