Editor’s Note: This article was originally posted at 10:31 a.m. CST on Monday, Dec. 3. It was updated at 3:25 p.m. CST on Monday, Dec. 3.
The positive impact of a possible trade truce between the U.S. and China — albeit a temporary one — that commodity groups and traders were looking for was seen Monday as futures prices for soybeans, corn and wheat all ended the day higher.
President Donald Trump tweeted early Monday: “Farmers will be a very BIG and FAST beneficiary of our deal with China. They intend to start purchasing agricultural product immediately. We make the finest and cleanest product in the World, and that is what China wants. Farmers, I LOVE YOU!”
Trump announced over the weekend his administration would hold off on higher tariffs against Chinese goods and that Chinese President Xi Jinping had agreed to immediately lift trade barriers on U.S. products, including agricultural products.
The two countries would begin 90 days of talks on issues such as forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture, the White House stated.
If the two countries can’t come to terms, the White House stated, the president will raise tariffs on $200 billion work of Chinese products to 25%. But, for now, a 10% tariff will remain in place.
The White House stated: “China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries. China has agreed to start purchasing agricultural products from our farmers immediately.”
Leadership from the American Soybean Association praised the news. ASA President John Heisdorffer, a soybean grower from Keota, Iowa, said: “This is the first positive news we’ve seen after months of downturned prices and halted shipments. If this suspension of tariff increases leads to a longer-term agreement, it will be extremely positive for the soy industry. We want to begin repairing damage done to our trade relations with China, which has been essential to successful soybean exports for years.”
Soybean contracts on the CME closed 10 1/4 cents to 11 cents higher Monday, reflecting the soybean market continues to hang its hat on any potential positive news of China possibly beginning to buy U.S. soybeans again.
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Still, China’s statement after the G-20 meeting was different from the U.S. statement. Chinese officials agreed the country would buy more U.S. products, but China’s statement did not mention it would immediately restart buying agricultural products as the U.S. stated.
So questions remain about whether commodity purchases from China will pick up. Also, logistically, it could take 30 to 45 days to begin moving products out of export areas such as the Pacific Northwest, meaning U.S. soybeans shipments would still be competing against early soybeans from the South American harvest.
President Trump continued to tweet about his meeting with Chinese President Xi Jinping on Monday: “My meeting in Argentina with President Xi of China was an extraordinary one. Relations with China have taken a BIG leap forward! Very good things will happen. We are dealing from great strength, but China likewise has much to gain if and when a deal is completed. Level the field!”
Trump added that China had agreed to reduce tariffs on cars coming into China from the current 40% tariff level.
Farmers for Free Trade Executive Director Angela Hofmann said: “Any signal, even if temporary, that this trade war may de-escalate is welcome news for farmers. While farmers are cautiously optimistic about this development, they are also keenly aware that they are still subject to the existing painful retaliatory tariffs and lost markets that have hurt their recently harvested crops and income.”
“American farmers are results oriented and are hopeful that all parties will quickly resolve the trade war so they can regain markets that are decades in the making.
“In the months ahead, Farmers for Free Trade will continue traveling across the country to hear from farmers and to amplify their voices in Washington, D.C. The voices of American farmers have helped to create the pressure needed for any progress in easing trade tensions. Further progress will continue to require their stories and their advocacy.”
Dan Halstrom, president and CEO of the U.S. Meat Export Federation, pointed more toward the USMCA trade deal, but also the ongoing steel and aluminum tariffs that have resulted in retaliatory tariffs against U.S. pork and beef.
“U.S. meat exports have also become entangled in trade disputes with China, so it is encouraging to see the U.S. and China return to the negotiating table,” Halstrom said. “Global demand for U.S. red meat is very strong, but exports cannot reach their full potential until the retaliatory duties imposed by Mexico, China and Canada are removed.”
Agricultural exports to China have been hit hard by the tariffs. China imported $14 billion in soybeans alone from the U.S. in 2017, but in the current marketing year have bought just 2.2% of the volume purchased at the same period last year. Cotton purchases are less than half of what they were a year ago as well. Pork exports to China/Hong Kong, facing 62% retaliatory tariffs right now, are down 24% in volume and 18% in value over 2018 as well.
Chris Clayton can be reached at Chris.Clayton@dtn.com
Follow him on Twitter @ChrisClaytonDTN