Extension Communications
3614 Administrative Services Building
Ames, Iowa 50011-3614
(515) 294-9915
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Extension Communications |
11/13/03
FOR IMMEDIATE RELEASE
Contacts:
Robert Wisner, Ag Economics, (515) 294-6310, wisner@iastate.edu
Jean McGuire, Continuing Education and Communication Services, (515) 294-7033,
jmcguire@iastate.edu
China Committed To Buying More U.S. Products
Large Chinese purchases of U.S. soybeans and cotton have boosted prices for those crops and led to the most volatile prices since the mid-1990s. Robert Wisner, Iowa State University (ISU) Extension economist says anticipation that China may also make sizable purchases of U.S. wheat and reduce its corn exports also has strengthened corn and wheat prices. "China will likely be the major focus of corn and soybean markets for the next several months," he said.
"After a recent meeting of China's Vice Minister of its Development and Reform Commission with U.S. officials in Washington, D.C., a commitment was made to make 'large-scale' purchases of U.S. agricultural and industrial products to help reduce the U.S. trade deficit with China," said Wisner. Potential quantities are uncertain and more information may come from the Chinese Premier's visit to Washington in December. In the meantime, according to Wisner, it will be important for farmers and agribusinesses dealing with grain to carefully monitor USDA's weekly export sales reports.
Through the end of October, the economist said China had purchased a very modest 6.5 million bushels of U.S. wheat. USDA data indicate China imported 16 million bushels of wheat from all sources in the 2002-03 marketing year, with about 1/5 of it coming from the U.S. Its Nov. 12 World Supply-Demand report indicated China is likely to import only 18 million bushels of wheat in the current marketing year.
Wisner said U.S. corn export sales to South Korea will be a leading indicator of whether China is reducing its corn exports. South Korea is China's largest customer for corn. "If the Koreans make large purchases of U.S. corn for several weeks, it would be a good indication that China's export supplies are being reduced. With near record low world wheat and corn stocks as a percent of annual use, any unexpected surprises in Chinese corn and wheat trade could have substantial impacts on grain prices," he said.
The economist noted that so far, China has been a very aggressive purchaser of U.S. soybeans and cotton. Its purchases of U.S. cotton through late October have already exceeded its total imports from the U.S. last season by 32 percent and were more than twice as large as our second largest foreign buyer of cotton. He noted that China's purchases of U.S. soybeans through late October were 162 percent above a year ago.
"Strong Chinese economic growth also is a factor behind increased energy prices, in addition to reports of nearly 300,000 to 500,000 used cars being imported into Iraq in recent months," said Wisner. "Growing demand for energy is a factor behind a sharp rise in ocean freight rates for shipping grain to foreign markets, which have added to the delivered cost of U.S. grain." However, he said these added costs have been moderated by a 5.5 percent decline in the trade-weighted value of the U.S. dollar against foreign currencies.
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