China is the largest importer of U.S. soybeans and, as of this week, the country wants more information on incoming containers.
Soybeans are tested for quality and the ones headed for China under most contracts can have up to two percent so-called foreign material—dirt, stems, grass and weed seeds, according to Iowa State University agricultural engineering professor Charles Hurburgh.
“The Chinese have observed certain weeds, the concentration—the levels—of certain weed seeds to be going up,” Hurburgh says.
So now China wants to know whenever a load of beans has between one percent and two percent foreign material, even though that’s still within the contract.
“It’s a request with some potential, potential not guaranteed, consequences if the request isn’t filled,” Hurburgh says.
Soybeans can be graded as Number 1 or Number 2. China typically buys Number 2 beans, Hurburgh says. Number 1 beans cannot have more than one percent foreign material. He says it stands to reason that more foreign matter will correlate with more weed seeds.
“There’s science in it, if the Chinese don’t want these seeds,” he says. “But there’s also market politics in it, in the fact that everyone knows it’s hard to selectively remove those without lowering the foreign material in general.”
That could lead the Chinese to effectively get a higher quality shipment without paying more for it, Hurburgh says, though the stated reason for the request is that China wants to prevent importation of undesirable weeds.
The U.S. Department of Agriculture is coordinating the additional export step. For now, Hurburgh says there is nothing Iowa farmers need to do, particularly because he says Iowa, Indiana and Illinois tend to have very low levels of foreign material and most of their soybeans are not destined for the export market anyway.
But if China ends up unhappy with how the U.S. responds to its request, and decides to reduce its orders of U.S. soybeans, as Hurburgh says it has indicated it might, a resulting shift in the global soybean market could have a financial impact here.