Chinese companies made a big purchase of U.S. soybeans(worth $180 m) on Wednesday December 12, a sign that the biggest buyer of U.S. soybeans is turning back to the market that had suffered from disruption for several months due to the ongoing trade spat between the two sides.
The purchase came 11 days after the Xi-Trump meeting during sidelines of the G20 summit in Buenos Aries on December 1. The two leaders agreed on a truce that would delay additional US tariff on $200 bn worth of Chinese products that was originally planned to take effect on Jan.1, 2019. China is said to have promised to make “substantial” purchases of U.S. agricultural goods.
Soybeans are harvested south of Luverne
“This is obviously positive news for our growers and for US-China trade relations,” said Jim Sutter, CEO of the US Soybean Export Council.
U.S. soybeans futures hit their close to five-month high since early August, a continued rising trend happened just shortly after the Xi-Trump meeting.
The two sides had conducted dialogues during the meeting, and later there was a telephone exchange among Chinese Vice-Premier Liu He, US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer. Trump described the call as “very productive”.
The Chinese buyers are Sinograin and COFCO, according to Reuters.
U.S. sellers are said to include Cargill Inc, the Louis Dreyfus Co and CHS Inc.
The U.S. has a record high level of soybean stocks this year, according to a monthly report released on Tuesday December 11 by the US Department of Agriculture, whose estimate of U.S. soybean stocks for the 2018/19 marketing year hits about 955 million bushels.
What has made this worse is that China, who has been buying almost 60 percent of all U.S. soybean exports, turned to Brazil and Argentina during the 2018 trade war.
Over the past years, U.S. soybeans dominated Chinese imports during December to February, when the traders shipped new crop supplies before rivals in the South American bring their harvest to the export pipeline, however, this pattern has been shifted by the China-US trade dispute.
However, even if China’s purchases resume, the additional demand may not do much for prices, as world supplies are expected to close the marketing year of 2018 at an all-time high, said Bryce Knorr, senior market analyst at Farm Futures.
In addition, according to truce measures between the two countries, China will suspend tariffs levied on US-made vehicles and auto parts for 3 months, say, from Jan.1 to March 31. This concrete measure will postpone tariffs of 25 per cent on 144 taxable items and tariffs of 5 per cent on 67 items.
The measure is expected to boost imports of some items needed by the market, and help to satisfy households’ demand, according to the State Council’s Tariff Commission Office.