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China companies buy over 200 million bushels of U.S. soybeans

Chinese soybean buyers Monday signed 15 contracts worth an estimated $2.07 billion C.I.F with U.S. exporters, during a visit to the Chicago Board of Trade.

During a signing ceremony, 14 Chinese companies announced purchases of U.S. soybeans equalling 5.76 million metric tons, or 209 million bushels.

The soybean purchases are for the 2007-2008 marketing year.

China, the world's number four soybean producer, imports 40% of U.S. soybean exports each year.

Phillip Laney, China country director for the American Soybean Association's International Marketing division, described the visit as a way to send a message ahead of next week's high level trade talks in Washington, D.C. between leaders of the two countries.

"The China government wants to remind the U.S. public that China is buying products. Obviously, to U.S. corn, soybean, and cotton producers this is very important," Laney said.

Also, the Chinese delegation, made up of 13 companies, is scheduled this week to visit Midwest grain elevators, a biodiesel plant and a soybean farm on their way to another contract-signing at the Iowa statehouse.

Noel Blue, a CBOT floor broker and market analyst said the China delegation visit is seen having little impact on the market.

"I hear it's more of a 'pomp' thing that is good for relations, or publicity, not so much an impacting event," Blue said. News of this did surface last week, but it is definitely not impacting the trade. The market participants have a clear agenda to get these beans back above $8.00 per bushel, and with soyoil on fire, driven by Malaysia and domestic fundamentals and a price near 3500 (and a clear lack of sellers thus far), it is a total recipe for a rally and has not so much to do with a purchase visit from China."

Meanwhile, Laney said it's important the China government shows that despite market access issues, U.S. soybean imports are a priority.

"Not everybody in China is in favor of U.S. soybean imports," Laney said. "Some people say it hurts Chinese farmers. This visit symbolizes the Chinese government stands behind the imports. I think we can be rest assured, China's government won't inhibit our future exports."

Blue agreed the market participants will be noticing the message of future purchases.

"It is no surprise that China's consumption of soybeans will grow, Blue said. "Thus, the need for an increased demand next year will practically be a certainty," Blue said.

In addition, China's consumption of pork, poultry meat, eggs and fish are growing at dramatic rates, and U.S. soybeans are fueling much of that growth, Laney said.

"With China's producers seeing higher returns on corn, they are planting less soybeans. So, in order to feed the increased amount of livestock, China will have to rely even more on soybean imports," Laney said.

Chinese soybean buyers Monday signed 15 contracts worth an estimated $2.07 billion C.I.F with U.S. exporters, during a visit to the Chicago Board of Trade.

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