China resumes normal American soybean purchases, returning to the status quo preceding Trump’s inauguration

One of the biggest pieces of news coming out of President Trump’s recent meeting with Chinese President Xi Jinping is the fact that China will resume buying American soybeans. Retaliating against Trump’s rash tariff initiatives earlier this year, the Chinese had cut their purchases of American soybeans sharply between January and August, buying none between last June and August. 

China, which has found adequate supplies of soybeans in other parts of the world, mainly South America, has no particular dependence on the American product. Its decision to resume normal purchases of American beans came after the Trump-Xi meeting a week ago is seen as some sort of win by Trump and his negotiators, but the deal calls for the purchase amounts to be about in line with quantities they bought in recent years.

No doubt the agreement will do something to support grain prices, at least for the short term. More important, perhaps, is the relief it gives to farmers seeking storage for all the beans that have been piling up as this year’s harvest has gotten underway 

Other than that, in no way does the China purchase news moderate some of the most serious issues confronting farmers these days, including soaring costs for fertilizer, repair parts and seeds. Addressing the situation, Iowa farmer Robb Ewoldt, a director with the United Soybean Board, tells AP, “I hope the administration doesn’t think that this solves everything in the next 6 to 8 months or ten months.” 

Farmers have welcomed the market reaction to the Trump-Xi meeting, which has given soybean prices an upside bump of about one-dollar/bushel, a nice short-term result. Longer-term, though, the situation is iffy. It’s important to remember that South American farmers, most notably in Brazil, are still in the competition to sell soybeans to China. China shifting its buys to the United States doesn’t change the world supply of soybeans. For their part, Brazilian farmers are saying that the Chinese decision to buy American beans is a routine seasonal trade that “happens every year” at this time because the U.S. has newly harvested soybeans on hand while Brazil is just putting in its new crop and its stocks are low.

A comprehensive discussion about coming Brazilian supplies in AgWeb is skeptical about additional Chinese purchases of American beans after their first wave of buying ends this winter. The piece notes that when Brazilian farmers are done harvesting next March, “a huge soybean crop will be ready for export.”

China appears to have found a way to play Brazil and the United States off against each other.

On balance, this deal is probably a short-term win for American soybean producers if only because it reduces pressure created by lack of storage space. Everybody hopes crop prices keep gaining, but after the first of the year, when those Brazilian crop numbers come out, the soybean market is anybody’s guess.

As to Trump, after nearly wrecking the whole global soybean trading structure with his erratic and impulsive tariff decisions, he has successfully returned farmers to their pre-inauguration status quo.

Trump is taking us back to where we’ve been and he calls it “amazing.”  

John Tsitrian is a businessman and writer from the Black Hills. He was a weekly columnist for the Rapid City Journal for 20 years. His articles and commentary have also appeared in The Los Angeles Times, The Denver Post and The Omaha World-Herald. Tsitrian served in the Marines for three years (1966-69), including a 13-month tour of duty as a radioman in Vietnam. Republish with permission.

Photo: President Trump meets with Chinese leader Xi Jinping last week, public domain, wikimedia commons

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