The Chinese government would like the historic Silk Road to be prominent once again, and U.S. soybeans could play an important role.
Shaanxi Shiyang Group established its soybean crushing business in Xi'an, a city far from the Chinese coasts and other competitors. Preferring to rely on a strong transportation network that includes roads, river and rail the company believes it will be best for their business to be near their customers.
Sound familiar? It did to Governor Kim Reynolds and other members of an Iowa Soybean Association (ISA) trade mission last week as they visited the company.
"We have a lot in common," Reynolds told the CEO while pointing to the state of Iowa on a map on the back of an ISA business card. "We are in the center of the country far from the coasts too."
Chang Qingshan, CEO of the Shaanxi Shiyang Group, hopes the strategic position will capitalize on the reemergence of the Silk Road.
The Silk Road was an ancient trade route between China and the West during the Roman Empire. It’s how silk from the orients make it to Europe and how China received western goods in return.
China President Xi Jinping announced in 2013 a new $900 billion trade corridor would reopen channels between China and Central Asia, the Middle East and Europe. The new Silk Road will be on land and sea with experts saying it will be a way for China to continue to boost global trade.
"They don’t have as much competition in the central part of China. If you look at the re-establishment of the silk road going north and west out of China there’s a lot of advantages logistically," Kirk Leeds, ISA CEO, said after touring Shaanxi Shiyang Group's facility.
Shiyang Group was first established in 1992 and transformed into a joint stock limited company in 1999. The Group focuses mainly on farming, breeding and processing but it also has integrated into other areas like the sale of soybean cooking oil. The CEO told the ISA delegation and Governor Reynolds that 35 percent of the beans they crush is from the United States.
"They told us that 35 percent of their soybeans come from the U.S., but that leaves 65 percent that didn’t," Leeds said. "You have to listen to customers, but at the end of the day when you look at the total value of soybeans, consistency, on-time delivery and financing, they know there is an advantage in buying from the U.S."
Qingshan told the Iowa delegation he continues to be concerned with foreign material in shipments coming from the U.S., but as the Iowa group drilled into the numbers, they found the percentage was below the allowable rate for the beans they had purchased.
Currently, one out of every four rows of soybeans are exported to China. The country is by far the largest soybean importer projected at 83 million metric tons, or a little more than 3 billion bushels.
Jeff Jorgenson, an ISA director from Sidney, and other U.S. farmers would like that number to increase as large surpluses drag commodity prices down.
“There’s no better opportunity to sell soybeans than right now," Jorgenson said. "There is affordability, and we have plenty of supply, so obviously we see that in the markets. There is no better opportunity than having the folks we have in China with Ambassador Branstad, with the United States Soybean Export Council and our Governor that we shouldn’t be able to make strides in moving more soybeans to China.”