China digs deeper into US breadbasket
President Carter has got the long-term grain agreement be sought with China. A $4 billion agreement signed in Peking Oct. 22 commits China to buy 6 to 9 million tons of wheat and corn annually for the next four years from the United States. If it to wants to buy more than 9 million tons in any given year, there will have to be prior consultations with Washington.
In fact, China already is buying close to the 9 million-ton upper limit during the 1980-81 fiscal year. Analysts here estimate Peking is buying 6 million tons of wheat and 2.5 million tons of corn. In addition China is purchasing almost 1 million tons of soybeans and 2 million bales of cotton, neither of which is covered by the agreement.
In short, China is becoming a $2 billion-a-year customer of US agricultural commodities at a time when farmers in the Midwestern grain belt are complaining of losses because of the continued embargo on wheat exports to the Soviet Union.
To that extent, the grain agreement may help to boost President Carter's election chances in states where he faces an uphill battle against Republican contender Ronald Reagan. If such thoughts crossed the minds of the signers of the agreement in a reception room of the Ministry of Foreign Trade here, they did not show it. US Ambassador Leonard Woodcock and Chinese Minister of Foreign Trade Li Qiang were all smiles as they sat down to affix their signatures to page after page of formal text.
The actual negotiating had been going on since mid-September between a US Agriculture Department team led by Thomas R. Saylor and a Chinese team headed by Tong Zhiuang, an official of the China national cereals, oils, and foodstuff import and export corporation.
Chinese purchases of US grain have increased sharply this year, perhaps in expectation of poor harvest because of prolonged drought in some areas and floods in others. As things have developed, however, China's harvest this year is likely to be second only to last year's record of 332.12 million tons.
This is ascribed partly to better seeds and use of more fertilizer and pesticides and partly to a peasantry encouraged by higher purchase prices and greater leeway in planting and selling crops.
For a variety of reasons, it is still more economical for China to buy grain for its great cities, clustered along the coast and major rivers, from overseas than to rely entirely on domestic supplies.
Thus China is likely to be a steady customer for grain-exporting nations like the United States, however good its own harvests may be. Last year Peking bought about 10 million tons of grain from overseas suppliers, and half of that came from United States.
Other major suppliers are canada, Australia, Argentina, and France. China Already has concluded long-term grain agreements with all of them.