During a tour of U.S. soybean production areas last week, a group of Chinese buyers signed 27 contracts worth an estimated $2.7 billion with U.S. soybean export companies. In Iowa, 10 contracts were signed for 2.2 million metric tons of soybeans worth $700 million. Some of the agreements were signed when the Chinese delegation visited the state capitol in Des Moines on May 17.
The contracts signed by the Chinese companies account for 70% of the 410 million bushels of soybeans U.S. farmers are expected to sell to China during the 2007 marketing year. Iowa is the No. 1 soybean-producing state, so clearly a large percentage of the soybeans purchased will be grown in Iowa.
The Chinese visit builds on an increasing trade relationship between the U.S. and China. China is currently the leading export market for U.S. soybeans, as China purchases almost 40% of U.S. global soybean exports. In 1998, China's import of U.S. soybeans was virtually zero, but that number grew to an astounding 435 million bushels in the 2004-2005 marketing year.
China has become No. 1 buyer of U.S. beans
The Iowa Soybean Association, U.S. Soybean Export Council and Iowa Department of Economic Development hosted the event at the Iowa capitol.
About 40% of the U.S. soybean crop is exported and China has become the No. 1 export market for U.S. soybeans. Fueled by economic growth, China purchased almost 365 million bushels of U.S. soybeans in 2006.
Grant Kimberley, director of market development for the Iowa Soybean Association, says the delegation was in Chicago earlier in the week and spent the last couple days of the week in Iowa. They have also spent some time in Missouri and in Washington, D.C.
"The member Chinese companies in this delegation while in the U.S. signed contract agreements with U.S.-based companies to purchase $2.7 billion worth of U.S. soybeans over the next year," says Kimberley. "That amounts to over 8 million metric tons of soybeans, or just under 300 million bushels of soybeans."
China's growth boosts bean demand
They bought more than was expected. "Last year a delegation of Chinese came over to the United States and signed purchase agreements for about a billion dollars worth of beans at that time," says Kimberley. "Overall the Chinese typically import about 40% of all the U.S. soybean exports or about 400 million bushels. So with this delegation last week, Chinese buying is almost up to that amount already. We think they will probably surpass it this year. That's a lot of money coming into the Iowa farm economy."
This year soybean prices are higher, but demand is still there. The economies of the world, especially in China, continue to grow. China has an increasing middle class, and a prospering middle class likes to increase meat consumption in their diet. As meat consumption is increased, livestock production has to be increased and the Chinese are buying beans to feed to livestock. Soybean meal is a great protein source and it is what the Chinese and other buyers typically use.
China still consumes a large quantity of soybeans directly as human food. The Asian culture is very familiar and in tune with the health benefits of soy protein. "So we do continue to see growing use of direct human consumption of soy. But we're also seeing growth of soybean consumption for livestock production in China and other Asian countries," says Kimberley.
Exports continue despite higher prices
Export numbers continue to look strong for both corn and soybeans. Despite higher prices than a year ago, this delegation of Chinese buyers is saying, "We need the soybeans."
Elsewhere around the world, where is the next big market for U.S. soybeans? "One of the next big markets, besides the Chinese market and Asian market in general, is Mexico," says Kimberley. "The Mexican soybean market is very critical to American farmers and we have a competitive advantage because of our proximity--our access to rail and water transportation to access that market."
Those are key markets, but all markets are very important. Europe is important as are parts of the Middle East and other parts of Asia as well, he emphasizes. "There are a lot of opportunities out there and we're going to continue to work hard to develop export opportunities for U.S. soybeans."