China to buy $5.3B in U.S. soybeans

At a ceremony Thursday, soybean leader Ray Gaesser cracked the deals U.S. and Chinese grain industry leaders signed in Des Moines equaled about all the soybeans Iowa producers would harvest this year -- and he was close.

Chinese leaders pledged to buy 13.18 million metric tons of U.S. soybeans -- or about 484 million bushels -- in deals that represent about $5.3 billion.

Iowa farmers are expected to harvest 525.8 million bushels of soybeans this year, about 4 percent more than 2014. It would be Iowa's largest soybean crop, making the state the nation's second-largest soybean producer. Altogether, U.S. farmers will harvest 3.94 billion bushels of soybeans.

The size of Thursday's deals was larger than expected and represents about half of China's annual purchases, said Grant Kimberley, market development director at the Iowa Soybean Association. "This gives us a good starting point, a good foundation for a strong year," he said.

The Chinese deals comes at a critical time, say experts, shoring up demand for a bin-busting harvest at the same time concerns grow over weakening economies in China and Europe.

"This business is valuable to the U.S. soy industry, especially when another bumper is being harvested right around the corner," said Gaesser, an Iowa farmer who is chairman of the American Soybean Association. "Competition is intensifying, while the global economic outlook presents many uncertainties."

Chad Hart, an Iowa State University agricultural economist, said the agreements help boost confidence.

"It probably won't spur prices higher. Even though it's a big buy, it's not that big from China," Hart said. China buys about 900 million bushels of beans from the U.S. annually. "Any other country, it would probably be a record purchase."

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Similar contract agreements resulted in purchases of $2.3 billion in U.S. soybeans in 2014 and $2.8 billion in soybeans in 2013.

The deals Thursday represent record volume if not price, Kimberley said. The deals involved some U.S. agricultural heavyweights -- Cargill, Bunge and Acher Daniels Midland.

The soybean industry says the U.S. shipped $24 billion worth of agricultural products to China last year. Soy accounted for $14 billion of that total.

The purchase pledges are important politically, but it's unlikely to significantly boost markets, said Don Roose, president of U.S. Commodities, a West Des Moines commodity broker.

"It’s a big deal for the state, given our close ties with China," Roose said. "But will it be a market mover once it’s announced? I don’t think so. Not at the moment."

Lt. Gov. Kim Reynolds said China's growing trade partnership with Iowa has been building for decades. Chinese President Xi Jinping visited the state as a provincial party official in 1985 and met Gov. Terry Branstad. He visited with Xi Wednesday in Seattle.

The contracts signed Thursday represent the importance of those relationships, Reynolds said.

Laura Foell, chairwoman of the U.S. Soybean Export Council, said U.S. soybean leaders have worked with Chinese leaders for more than 30 years to build relationships. China is Iowa's fastest-growing trade partner. Iowa exports to China have nearly tripled since 2009 to nearly $1 billion.

"China wants to do business with people they know and trust," said Foell, who farms near Schaller in northwest Iowa.