A purchase agreement signed June 5 in Des Moines will result in four Panamax ships full of soybeans setting sail from the United States to China during the next marketing year which begins this coming fall.
China Jiusan, one of the largest soybean crushers in China, agreed to buy 200,000 metric tons of soybeans from Zen-Noh Grain Corp., a grain trading company based in Mandeville, La. The action occurred during a contract signing ceremony hosted by the Iowa Economic Development Authority at the State Capitol building in Des Moines.
The deal is worth an estimated $100 million and was one of several contracts and memorandums of understanding (MOU) signed between Chinese government and business representatives and Iowa agriculture and business officials. The Iowa Soybean Association and the Iowa Department of Agriculture & Land Stewardship each signed a MOU of cooperation with the China Chamber of Commerce of Foodstuffs & Native Produce to foster even more agricultural trade between Iowa and China.
This agreement is significant, China is buying beans early
More than 50 people, including farmers and agribusiness and government officials from Iowa and China, filled the Iowa Supreme Court Chambers in the State Capitol to witness the signings. Grant Kimberley, ISA market development director and central Iowa farmer, said the soybean purchase agreement and ceremony at this time of year is significant. "China is securing soybean supplies early. And, this is a continuation of the strong relationship between Iowa and China established by Gov. Branstad and President Xi," Kimberley said.
The memorandum "marks a fresh chapter of our relationship," Zhang Xiangchen, the assistant minister of the China Ministry of Commerce, said in English during the signing ceremony. "Today is a great day for Iowa and China."
The memorandum of understanding between the state of Iowa and the Chinese ministry, plus four provinces in northeast China, creates a joint working group to enhance trade and investment. The provinces are Jilin, Heilongjiang, Liaoning and Heibei, Iowa's sister state. The areas are "breadbaskets, also like Iowa," Zhang said. The four provinces also have a population of 182 million people.
Such agreements promote cooperation and transparency
U.S. soybean farmers exported a record 1.58 billion bushels in 2013, valued at nearly $28 billion. Soybeans are America's leading farm export. With four months left in the current marketing year, U.S. soybean exports are on pace to set a new record. A growing middle class in the world's most populous country craving more protein is the major reason. Chinese pork production is up 39% since 2000, and soybean meal is needed to feed hogs.
ISA President Brian Kemp, who farms near Sibley in northwest Iowa, signed the MOU on behalf of the Iowa Soybean Association and its 11,400 members. He says the agreement forges a relationship of cooperation and transparency. "China is our No. 1 customer. With that partnership comes a responsibility," Kemp says. "For soybean farmers, that responsibility is to grow a high-quality, reliable supply of soybeans while caring for soil and water quality. We're dedicated to continuous improvement."
According to Ross Trentadue, merchandiser for Zen-Noh Grain Corp., the company sources much of its soybeans from the Midwest via barge and rail. One in four rows of soybeans grown in Iowa is exported. Continuing to build friendships with the top foreign buyer of U.S. soybeans is why ceremonies and farm visits are important, Kimberley added. The Chinese officials while here on their visit last week also toured the Kimberley grain farm near Maxwell, just north of Des Moines. Grant and his father, Rick, have hosted several Chinese delegations in recent years.
Chinese trade official says spirit of cooperation is alive and well
Rong Weidong, vice president of the China Chamber of Commerce of Foodstuff & Native Produce, said the spirit of cooperation is alive and well between the two nations. The chamber works with grain buyers in China to determine the nation's needs.
"Through the signing ceremony, we hope to foster a partnership with Iowa and a better future for all of us," Weidong said.
ISA secretary Rolland Schnell agreed. The rural Newton farmer said building even stronger friendships with China will help soybean farmers and all Iowans. "That bond was evident today," Schnell said at the signing ceremony. It will take about 7.4 million bushels of soybeans to fulfill the contract that was signed, which is more than what Schnell and fellow farmers in Jasper County produced last year (5.85 million bushels). The delivery date is sometime between this coming November and October 2015.
"Without a good relationship, they wouldn't have confidence in our soybeans," Schnell said. "The relationship will carry us through bumpy spots whether economic or political."
Memo calls for cooperation on areas that are Iowa's strengths
In addition to the soybean agreement, the state of Iowa also signed a cooperation agreement with the Ministry of Commerce of China, the world's second largest economy. Iowa is one of only three areas (the others are California and Chicago) to sign such a memorandum with the Chinese Ministry of Commerce, says Debi Durham, Iowa's economic development director. She says this agreement is a consequence of the February 2012 Iowa visit of President Xi Jinping, vice president of China at the time.
The memorandum calls for cooperation on areas that are Iowa's strengths, including agriculture, wind energy, biofuels and finance. It also includes environmental protection, which is considered an opportunity for U.S. companies as China vows to clean up its massive pollution problems. Durham envisions this agreement could lead to increased trade, as well as more communication on issues such as the regulation of biotech crops. That has been a controversial issue between the Americans and Chinese, who have blocked shipments of corn that Chinese officials say contain unapproved genetic modifications or GMOs.
Regulation of GMO biotech events is a touchy topic with China
Other agreements signed last Thursday included a cooperation agreement between the Iowa Department of Agriculture and the China Commerce of Foodstuffs and Native Produce, which represents grain buyers in China. The $100 million contract between grain traders in the U.S. and China covers soybeans planted this spring, for delivery after harvest this fall. The deal represents 200,000 metric tons of soybeans.
Such deals are usually signed in the fall and are larger. This one pales in comparison with a $4.31 billion purchase of soybeans that Chinese officials signed in 2012 during Xi's visit to Iowa. Of the soybean deal signed last week, Grant Kimberley says, "Any signing this time of year is well in advance of harvest, and it demonstrates the demand in China remains strong as they try to secure supplies early."
Laura Foell, soybean grower from Schaller in northwest Iowa and secretary of the U.S. Soybean Export Council, told the Chinese delegation in Des Moines she is grateful for their business. One out of four rows of U.S. soybeans is exported to China, she said.