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Chinese soybean buyers are encouraged by Indiana crop
Indiana Correspondent

GALVESTON, Ind. — Soybeans are big business in China, which is why a group of about 25 Chinese buyers talked with Indiana farmers and toured Kokomo Grain recently, to discover the drought’s effect on this year’s crop.

Corn, soybean and tomato farmer Kevin Wilson answered many grain-related questions Sept. 22 at his Galveston farm. Wilson and his brothers, Kurt and Kody, grow about 1,300 acres of corn, 1,150 acres of soy and 300 acres of tomatoes each year.

Wilson said China buys soybeans mainly for livestock feed – swine, poultry, shrimp and carp – and vegetable oil production. “They grow soybeans (and corn) too, but not enough,” he explained.

About 90 percent of the soybeans China imports come from the United States and Brazil. The Asian country buys about 22 million metric tons of soybeans from the U.S. and South America annually, which equals 3,647 million bushels, according to Claudia Chong, an escort with the group of buyers.

Xiaoping Zhang, China country director for American Soybean Assoc.-International Marketing, broke it down further: “Every one in four rows of soybeans planted in the U.S. will be shipped to China.” U.S.-Chinese soybean imports began in earnest around 1995, Zhang said.

While drought does worry buyers, Wilson said the Chinese are concerned about crops most of the time. “They’re big into food security,” he explained, likely because of the their large population.
They grow as much soybeans and corn locally as they can for human consumption, but they can’t grow enough for livestock too, with limited ground.

“When I was (in China in July as Indiana Soybean Alliance president), they all heard how we were suffering in a drought and were very concerned,” Wilson said. Zhang said Brazil was affected by a drought last year.

“In this area of Indiana, soybean yields are probably above average,” Wilson explained to the group of buyers. “The corn won’t be as good as the soybeans.”

The buyers were encouraged by conditions they’ve seen in Indiana, Zhang said. “The first farm we saw (owned by Scott Fritz in Winamac) was pretty good,” he said. “It was better than we expected.”

Average soybean yields appear to be 30 to 35 bushels per acre on Fritz’s farm, Zhang said. In a normal year, yields would be about 45 bushels. “I think the U.S. has a commitment to supply China (with soybeans) and I think there still will be plenty of soybeans to sell.”
Pei Yong, assistant general manager and futures director at Chinatex Grains and Oils in Beijing, also seemed to like what he saw.

“Our major concern is yield and quality,” he said. “Yields (in Indiana) were a little better than we expected. Yields are different between states and the East and South yields are bad. This affects future supply, conditions and the futures market.”

Zhang said buyers still worry about frost, but will continue to monitor U.S. soybean crop conditions.

During Wilson’s presentation, questions became technical. Buyers wanted to know how he decides when to sell his beans, as he is able to store and dry most of his crop before sale. “This year, the market is telling me to sell now so I’m selling more now,” he answered.

The same day buyers visited Wilson’s farm, they also toured Kokomo Grain with Thomas Madru, its grain manager, and Michael Silver, its senior grain merchandiser. Kokomo Grain operates 10 elevators in Indiana and Tennessee.

Three of the elevators have access to railroad lines and can ship grain to markets across the United States and for export. Elevator workers can load an 85-car train with 340,000 bushels or 3,600 metric tons of grain in 10 hours, Silver said.

One of the Tennessee elevators handles all the malt, barley, rye and corn for Jack Daniels whiskey, he added.

Questions got technical again at Kokomo Grain, as buyers wanted to know the protein and oil content of Indiana’s soybeans.
“Indiana historically has high protein and oil content,” said Silver, who also is chair-elect of the Agribusiness Council of Indiana. “It changes from year to year a little and within the U.S. This has a lot to do with the growing season.”

Indiana, Ohio and Michigan have good, high-quality beans, he added.

The grain merchandiser called ADM in Frankfort to learn that local dry soybeans have 19.5-20 percent oil content and 47 percent protein content. Silver said Kokomo Grain usually sells grain to Cargill, ADM and Louis Dreyfus.

Buyers also wanted to know how much grain is hedged at Kokomo Grain; Silver said all of it is. He also let buyers know he visits the Dalian Commodity Exchange online, which is equivalent to the Chicago Board of Trade.

During the tour, he told the group Kokomo Grain can store 9 million bushels of grain at one time. All 10 elevators can store 37 million bushels. By the end of the tour, Yong was impressed. “This elevator, the storage and scales ... is more efficient (than ones in China),” he said.

When asked about how the quality of soybeans in the United States and Brazil compare, Yong said the beans in northern Brazil have a higher percentage of protein.

However, U.S. beans have better protein content than those in southern Brazil and Argentina. Still, China can’t buy all its grain from South America because of the continent’s growing season. Zhang said Brazil plants soybeans in October and November for harvest in February and March. Beans there go to market in April.
The Chinese group had been in the United States since Sept. 16, said Zhang, who usually takes 2-3 similar trips annually. This trip included stops in Illinois, Iowa and Minnesota.

Before the Indiana leg, Yong said the group was in New Orleans to check out port conditions.