China’s shopping trip to the United States in early April to purchase cotton and soybeans was more of an affirmation of the relationship between China and the United States than something the market was interested in. Nonetheless, the purchases indicate what a huge trading partner the country has become.

In Chicago, a delegation represented by the president of the Chinese Chamber of Commerce announced that China had signed agreements with U.S. companies to purchase 4.9 million metric tons of soybeans (roughly 182 million bushels) from just Illinois alone. The total production of soybeans in Illinois last year was 247 million bushels.

The delegation then announced plans to travel to Minnesota where it was to sign more agreements to import U.S. soybeans. Contract prices were not disclosed because they were made with private U.S. suppliers.

The following day, November soybeans closed down 4 ½ cents to $5.88 ¾ despite the purchases and a USDA report of a 1.752 million metric ton (58 million bushels) soybean sale to China.

In Memphis, on Saturday, April 8, a delegation from the Chinese government signed agreements to purchase 1.1 million bales of mostly Texas cotton from seven cotton suppliers, Allenberg Cotton Co., Cargill Cotton, Dunavant Enterprises, Weil Brothers, Paul Reinhart, Jess Smith and Calcot.

Apparently, the news was already factored into the market. May 2006 futures settled down slightly at 53.20. Based on purchases since Aug. 1, 2005, China is already the single largest customer of U.S. cotton with purchases of 7.8 million bales, valued at more than $2 billion.

“The demand from China is so big that there is no longer a cyclical element to their buying,” said Joe Nicosia, CEO of Allenberg Cotton, in Memphis. “They need to buy year around. It’s going to continue indefinitely.”

The delegation of 200 Chinese executives visiting Memphis represented 110 private and state-owned companies. Led by Chinese vice premier Wu Yi, the group expected to purchase about $15 billion of U.S. products on the trip. While in Memphis, the Chinese delegation was also expected to sign contracts for Tyson poultry and soybeans.

The shipments of soybeans to China, which was announced at the Chicago Board of Trade, will occur throughout the calendar year, according to Cao Xumin, president of the Chinese Chamber of Commerce. China is the largest user and importer of soybeans in the world, importing about 25 million metric tons annually, almost half of which comes from the United States.

During the past five years, China has increased its imports from the United States from 4 million metric tons to 12 million metric tons.

It was unclear if the soybean purchases would be over and above what China already intended to purchase from the United States this year. Cao said only that Chinese soybean purchases will be higher than last year “because of the bad weather (and its impact on the soybean crop) in China last year.”

“The Chinese government has adopted a policy of reform and openness to economic development,” Cao said. “We have a tremendous demand for meal and oil. The Chinese imports also help the economic development in the United States, providing them with more employment on farms and on processing and storage. This is mutually beneficial relationship. We also want to enter into more agreements on other agricultural products.”

“The specifics of the invoiced amount is not as important as the fact that China is committing to buy U.S. product,” said Dan Durrant, CEO of U.S. Soybean Export Council.

“Nothing is guaranteed in this business and certainly not in agriculture. So many things can happen that will affect the pricing and the crops. These companies and the Chinese delegation are telegraphing to this country and the global economy of their commitment to U.S. agriculture.”

The Chinese delegation that signed the purchase agreements in Chicago represents 67 percent of total Chinese purchases of U.S. soybeans, around 282 million bushels.

U.S. soybeans have the fewest trade barriers among all world agriculture exports. Total U.S. soybean exports have nearly doubled since 1984, from nearly 598 million bushels to over 1.1 billion bushels in 2005.

Fifty-one percent of China’s soybean meal use goes into poultry production, 27 percent to swine production and 20 percent to aquaculture.

e-mail: erobinson@farmpress.com