Chinese Vice President Xi Jinping visited the United States this week, stopping in Iowa, one of the United States' top corn, soybean and hog producing states.
Xi is expected to become the next leader of China. During his Iowa visit, he reinforced China's trade relationship with the Midwest, announcing major purchases of U.S. agricultural exports.
Since the grain harvest last fall, China bought around 70 percent of American soybean exports and more than 10 percent of U.S. corn shipments.
China mostly grows and consumes its own corn, but has to meet nearly 80 percent of its soybean demand by buying from foreign countries like Argentina, Brazil and the United States.
China recently became the third-largest buyer of U.S. pork, importing nearly $1 billion in 2011.
Over the last 15 years, China increased its soybean purchases by 2,000 percent and went from being a major exporter of corn to a minor importer. Rising meat demand and high prices in China caused the Chinese to boost pork imports ten-fold since the mid-90s.
As China transitioned into becoming a major commodity consumer, the value of U.S. agricultural products exploded. Since 2000, corn prices more than tripled, rising from $2.04 per bushel to $6.44 on Friday. Soybeans shot up 175 percent from $4.61 per bushel to $12.73, and lean hog prices charged 63 percent higher, rising from 55 cents per pound up to 90 cents per pound.
As a result of increasing prices and trade volume, agriculture now accounts for one quarter of all trade with China, the United States' largest trading partner.
Petroleum pushes higher
Crude oil prices continued to surge this week, spurned by continued fears that Iranian threats could interrupt the supply of oil to global markets.
Rumors of Iran halting oil exports to Europe, a demonstration of Iranian nuclear advancements and a series of attacks on Israeli embassies all sent shock through oil markets. As of Friday midday, crude oil was trading near $103 per barrel, up $4.50 on the week.
Walt Breitinger is the president of Breitinger & Sons LLC, a commodity futures brokerage firm in Valparaiso, Ind. He can be reached at (800) 411-3888 or www.indianafutures.com.
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