By DOUG SCHMITZ
XIAMEN, China — A delegation of Iowa Soybean Assoc. (ISA) members traveled throughout China last week as part of a trade mission March 15-24, to “strengthen existing relationships, and explore new markets and opportunities.”
“Soybean production here, it continues to fall at a pretty good clip,” said Kirk Leeds, ISA CEO, during a live teleconference Thursday from China. “And soybean production will continue to fall in China.”
But Leeds said U.S. producers will continue seeing a growing export market to China. “There’s been an indication that they will import more, at least when you talk to the private sector,” he added.
He joined Mark Jackson, ISA president and a Rose Hill farmer; Brian Kemp, ISA president-elect and Sibley farmer; and Grant Kimberley, ISA director of market development. Along with Iowa Agriculture Secretary Bill Northey, the group highlighted the results of several high-level meetings it had with some of the Communist country’s key contacts.
As Iowa’s largest purchaser of U.S. soybeans, China, by all indications, “has no intentions to step up its own soybean production for crush,” Leeds said. “Certainly we continue to learn about their crush capacity, and they have 50 percent to 60 percent above capacity.
“But they’re not operating new plants, as they think they can be more efficient with what they’ve got. The people we’ve talked to say they have not heard of new expansion.”
The USDA’s March 8 World Agriculture Supply and Demand Estimates (WASDE) report stated U.S. soybean crush is ahead of 2012’s pace, but is projected to slow in the second half of the marketing year.
A Dow Jones report released last Thursday stated because monthly imports are lower than the crush demand, the Chinese government released soybeans from reserve to meet domestic demand. According to DTN/Telvent, China National Grain Reserves Corp. – the government stockpiler – will be selling more than 1 million metric tons of reserve soybeans to major crushers, including Cofco Corp.
Leeds said, however, the release of soybean reserves may have more to do with “port backups in South America.
“One of the raging debates is how big government stocks really are,” he explained. “They do this from time to time to maintain stability of price. The industry tells us they are not sitting on significant reserves. We’ve not heard from any industry folks that there are significant stocks.”
Northey said the soybean release may be a response to continuing port problems in Brazil. “Whether this is happening or not could be in response to China not being able to get beans from South America,” he said. “We need to make sure our infrastructure is good and we can deliver on time. We need to continue to be dependable.”
Kimberley said Brazil’s current port issues may open up more opportunities for U.S. producers. “It’s a problem,” he said. “It’s hard to plan when you don’t know when your deliveries are coming in. They are having to come back to the U.S.
“I’m sure China will have to be buying more from the U.S. We always deliver a message that we are a reliable supplier: Buy our soybeans, and they are shipped on time.”
The WASDE report predicted the nation’s soybean reserves would remain at their lowest levels in half a decade. The report estimated 2012-13 soybean ending stocks at 125 million bushels, unchanged from February. The report also projected the U.S. season-average soybean price would range from $13.80-$14.80 per bushel, narrowing 25 cents on each end from last month.
Although soybean export commitments through February exceeded 2012’s pace, the report said U.S. exports are expected to decline in the months ahead, as increased competition from a record South American crop limits additional sales during the second half of the marketing year.
Even though stocks remain unchanged, Jackson said the market’s reaction shows ongoing concern for adequate world grain and oilseed stocks, which may bring short-term marketing opportunities to Iowa farmers.
“Our world trading partners are cautiously watching the commodity market prices, which are rationing usage to bridge those gaps between crops while maintaining adequate grain stocks,” he said.
“The ISA has ongoing travels to maintain a positive dialogue to reassure customers that a consistent, adequate and quality supply of soybeans and related products will be available,” Jackson said, adding the trip “is one example of those efforts.”
In addition to meeting with government officials, the delegation visited aquaculture facilities – one of China’s fastest growing segments using soybean meal for feed. “Building strategic partnerships now will benefit all us down the road,” Kimberley said.
He said the ISA has maintained its relationships with new China President Xi Jinping and Chinese industry partners.
Xi first traveled to Iowa in 1985 as part of a Chinese delegation studying American agriculture, and returned last year.
“While we won’t be meeting with Xi, we are looking forward to celebrating his new position,” Kimberley said of Xi, who visited the Kimberley farm last year. “Iowa farmers have a unique connection with Xi and China, and we’re excited to strengthen our partnerships to benefit both countries.”
He said China continues to buy from the United States, even as recently as early March. “We are working to be as proactive as possible, and exploring new and growing markets in China.”
Northey said the United States will continue to see economic growth in China, despite the world’s current economic downturn.
“You see more and more meat, and more restaurants,” he told reporters. “This was just not the case 10 or 15 years ago. The economic growth has increased demand for meat. We continue to test that, and that’s not ending.”