February 3, 2012

 

China to sign soy deals with US

 

 

During a US trip this month, China will sign soy import deals by Vice President Xi Jinping, but volumes may slide a little of the biggest ever one-off deal signed during a Chinese visit last year, industry officials said Thursday (Feb 2).

 

US soy futures spiked last year after China signed deals to import 11.5 million tonnes of soy, worth about US$6.7 billion, during a visit by Chinese President Hu Jintao.

 

"The intended volume this time would be lower than last year, when the country's No.1 visited the United States," said one industry source, who declined to be identified.

 

China is the world's largest importer of soy and cotton, and a delegation accompanying Xi will sign deals to import beans, cotton and wine, the officials said.

 

The deals are likely to be more of a political gesture, with only framework contracts being signed, leaving prices and shipment details to be finalised at a later stage, the sources said.

 

The bulk of the business done during the visit is likely to be for the 2012/13 marketing year, the sources said.

 

Those contacted for the story declined to speak on the record because of the political sensitivity of the trip by Xi, who is expected to succeed Hu as China's president later this year.

 

China imports about 60% of soy traded across the world, with the United States, Brazil and Argentina the major suppliers. China's imports of 52.6 million tonnes included 22.3 million tonnes from the US in 2011.

 

CBOT soy rose for the last two weeks, buoyed by concerns over drought threatening to reduce output in Brazil and Argentina which could prompt buyers to seek more US cargoes in the coming months.

 

On February 15, a day after President Barack Obama hosts Xi at the White House in Washington, the Chinese soy delegation will travel to Des Moines, Iowa, where a signing ceremony will be held, according to the industry officials.

 

Officials from China's largest grain traders, COFCO as well as Sinograin, will be part of the visiting delegation.

 

It will also sign deals to import US wine worth about US$1 million, said one source, and others said US cotton purchases would be announced, although no details of those deals were available.

 

Although some Chinese companies are interested in US soymeal, sources said it was less likely that China would import soymeal because US prices were not attractive after taking into account taxes and other costs.