The purchase of over 1.5 million tonnes of beans is the most concrete evidence yet that China is making good on pledges the U.S. government said Xi made when the two leaders met on Dec. 1 and agreed to a 90-day detente to negotiate a trade deal
The article noted that, “Commodities traders and analysts said soybean prices may struggle to build on Wednesday’s gains unless China buys considerably more soybeans.”
Gregory Meyer reported last week at The Financial Times Online that, “More than 1.1m tonnes of sales were confirmed by the US Department of Agriculture on Thursday, in a report that recorded large transactions made before 3pm Washington time on Wednesday.”
For perspective, the FT article pointed out that, “The purchases reported by the council represented a fraction of the more than 30m tonnes of soyabeans the US was annually exporting to China before the new tariff. In December 2017 the US was exporting nearly 1m tonnes of soyabeans to China every week, according to the US Department of Agriculture.”
And on Friday, USDA announced additional “export sales of 300,000 metric tons of soybeans for delivery to China during the 2018/2019 marketing year, as well as, “Export sales of 130,000 metric tons of soybeans for delivery to unknown destinations during the 2018/2019 marketing year.”
Private exporters report the following export sales for MY 2018/19: 300,000 MT of #soybeans for delivery to China , 130,000 MT of soybeans for delivery to unknown destinations, and 125,000 MT of #corn for delivery to Japan. https://t.co/bHOLX6jkIy
Meanwhile, Bloomberg writer Mario Parker reported Thursday that, “China’s return to the U.S. soybean market this week comes too little, too late for many Iowa farming families to put more Christmas presents under the tree this year, according to third-generation grower Brent Renner.
“Renner said he’s cautiously optimistic after reports of the first U.S. purchases by China since Donald Trump and Xi Jinping agreed to a 90-day trade war ceasefire. But volume so far is ‘a drop in the bucket.'”
Reuters writers Julie Ingwersen and Karl Plume reported last week that, “China’s meager first purchase of U.S. soybeans since its trade war with the United States began in July disappointed farmers, grain traders and a U.S. government official hoping for larger sales to lift slumping prices and absorb a huge surplus across the U.S. farm belt, they said on Thursday.”
‘Having a million, million-and-a-half tonnes is great, it’s wonderful, it’s a great step,’ USDA Deputy Secretary Steve Censky said at an Iowa Soybean Association annual meeting on Thursday. ‘But there needs to be a lot more as well, especially if you consider it in a normal, typical year, we’ll be selling 30 to 35 million metric tonnes to China.’
The Weekly National Grain Market Review (USDA- Agricultural Marketing Service) on Friday pointed out that, “Last week’s export sales and shipments of soybeans totaled 29.1 million and 42.1 million bushels, respectively, still a bearish pace despite China’s purchase earlier this week.”
The Bloomberg writers noted that, “The soybean market is looking for much higher sales to China to put a dent in the mountain of beans stockpiled in the U.S. Inventories are set to double to a record 25.99 million tons, according to the U.S. Department of Agriculture. On Thursday, the USDA reported sales of 1.1 million tons to China.”
Also, a separate Bloomberg News article from Friday reported that, “Corn futures gained on Friday after Chinese officials were said to be preparing to restart purchases of American supplies as soon as January in another sign that China is working on a lasting detente with the U.S.”
The article pointed out that, “Unlike soybeans, where China has historically purchased about a third of the U.S. harvest, the Asian nation hasn’t been a significant buyer of American corn for several seasons. China is the world’s second-largest producer of the grain, and the last time it bought more than 3 million tons of U.S. corn in a calendar year was 2013, U.S. Department of Agriculture data show.”
Nonetheless, Bloomberg writers Jen Skerritt and Shruti Singh reported late last week that, “While reaction in the soy futures market has been muted so far as traders hold out for bigger purchases, U.S. cash prices have climbed. There’s also been a lot of action in the corn options market, while premiums for Brazilian crops have dropped.”
The article stated that, “The trend is reversing for American and Brazilian soy prices. When the Asian country snubbed U.S. supplies earlier this year, premiums for crops from Brazil started surging as trade flows changed. Now, cash prices for U.S. beans are recovering, and the Brazilian market is cooling off.”
The Bloomberg article added that, “The average U.S. cash corn price climbed to the highest since early June, according to an index compiled by the Minneapolis Grain Exchange. As China resumes its soy purchases, some traders have said that corn may be a surprise beneficiary of the easing trade relations.”
Lastly today, Reuters writer Humeyra Pamuk reported last week that, “U.S. Agriculture Secretary Sonny Perdue said on Thursday he expects the White House to approve a second tranche of aid payments to farmers hurt by ongoing trade disputes, despite new Chinese purchases of soybeans.
“Perdue told reporters he expected to meet with the White House Office of Management and Budget on the issue on Friday. He added that he hoped China would continue buying U.S. soybeans after the recent purchases, but said he had no knowledge of new agreements for China to do so.”
Many thanks to General Kelly for decades of exemplary and honorable service to his country, in uniform and in this @WhiteHouse. And congratulations to @MickMulvaneyOMB. We already have a strong relationship and I know we’ll continue to work together well.
On Friday, President Trump tweeted that, “I am pleased to announce that Mick Mulvaney, Director of the Office of Management & Budget, will be named Acting White House Chief of Staff, replacing General John Kelly…”
Keith Good is the social media manager for the farmdoc project at the University of Illinois. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily FarmPolicy.com News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.