October 26, 2023

Chinese delegation signs agreements to buy billions of dollars worth of US soybeans, corn

A delegation of Chinese commodity importers signed agreements to purchase billions of dollars' worth of United States agricultural goods, primarily soybeans, during a ceremony in Iowa, US, Channel News Asia reported.

These agreements were inked at the China-US Sustainable Agricultural Trade Forum and marked the first significant bulk purchases between top soybean importer Beijing and the US, the world's second-largest soybean supplier, since 2017.

In addition to soybeans, the deals also encompassed corn, sorghum, and wheat, according to the US Soybean Export Council. However, Chinese crop import volumes from the US have been notably lower this year as Brazil, the world's largest exporter of corn and soy, enjoyed a bumper crop harvest.

Key US crop merchants such as Archer-Daniels-Midland, Bunge, and Cargill were among the firms that signed 11 purchasing agreements, as indicated by the US Soybean Export Council. These deals took the form of "frame contracts," which typically serve as non-binding letters of intent to purchase goods at a later date without formal sales terms.

Jason Hafemeister, the acting deputy undersecretary for trade and foreign agricultural affairs at the US Department of Agriculture, said that these contracts highlighted the benefits of trade, with food moving from regions of surplus to areas facing deficits.

However, the latest USDA data, as of October 19, showed that China's soybean purchases from the most recent US harvest were down by 39% compared to the same period the previous year. Likewise, corn purchases had declined by 73% from the previous year.

Ted Seifried, chief market strategist for Zaner Ag Hedge, suggested that these agreements could signify China's intention to maintain strong trade relations over soybeans. Still, due to the current market conditions, the country might not aggressively purchase American soybeans this year. Traders are awaiting confirmation of sales from the US Agriculture Department in the coming days.

Although Chinese soybean buyers attending a large US soy export conference in August did not anticipate substantial growth in import volumes in the coming years, China recently made rare purchases of US soft red winter wheat due to damage inflicted by rain on the quality of the Chinese harvest.

-      Channel News Asia