Break in China trade talks yields soybean buy

Illinois Farm Bureau calls for efforts to recapture lost trade

An early season Illinois soybean field. (Shutterstock)

An early season Illinois soybean field. (Shutterstock)

By Ted Cox

A potential break in the U.S.-China trade talks led to a major buy of U.S. soybeans last week.

Reuters reported Friday that, a day after progress was reported in a new trade deal between the United States and China, state-owned Chinese firms bought more than a million tons of U.S. soybeans. It pushed soybean market prices to their highest point in months, even as it did little to minimize the stockpile of soybeans from last year’s harvest.

Experts cautioned that the purchase was targeted for Chinese state soybean reserves, and thus not subject to China’s 25 percent tariffs, which brought soybean trade between the two nations practically to a standstill last year as President Trump imposed protectionist tariffs on Chinese steel and other products, and China responded with retaliatory tariffs primarily on agriculture.

According to Reuters, traders reported the buy amounted to at least a million tons, and perhaps as much as 2.2 million tons, expected to be shipped from Gulf Coast ports between April and July. That pushed benchmark soybean futures on the Chicago Board of Trade above $9.31 a bushel, the highest mark since last June. But the total of 6.5 million tons of U.S. soybeans bought by China last year was a fraction of the usual 30 million market between the two countries.

Industry experts warned that China has shifted much of its soybean imports to Brazil since the tariffs were imposed last year, and that Brazil is about to harvest a bumper crop. Experts previously warned that U.S. soybean growers were in danger of losing trade to exports from Brazil and Argentina in what could easily become a long-term pattern.

“It certainly is good to see some concessions and more buying interest from China, but this is a concession in terms of a larger trade agreement,” said Terry Linn, an analyst with Linn & Associates in Chicago. “Brazilian offers are cheaper than we are so it’s just part of the negotiation.”

The Illinois Farm Bureau set its national legislative priorities last week, and chief among them was to “recapture lost export demand, enact the United States-Mexico-Canada Agreement, end retaliatory tariffs, and build new overseas markets.”

The Illinois Corn Growers Association cited a Politico story last week stating that the shutdown would delay any progress on the USMCA for 35 days. The association re-emphasized its support for the trade pact.

The Farm Bureau also called for sales of E-15 gasoline with ethanol to be expanded year-round, and for the new Farm Bill to be implemented as quickly and efficiently as possible — a process delayed by President Trump’s 35-day government shutdown. The bureau also intends to monitor new climate-change legislation to put a check on costly reforms, but reward conservation efforts, after U.S. Sen. Dick Durbin recently advised farmers to confront climate change.