US farmers 'cautiously optimistic' amid signs of progress in China trade talks

  • Farmers are hopeful about the chances of averting a costly trade war with China amid signs of progress in recent negotiations.
  • President Trump says China has agreed to purchase "massive" quantities of U.S. agricultural products.
  • Still, there's no firm agreement with China or any commitment to buy a specific amount of any goods.

Soybeans are harvested in Princeton, Illinois.
Daniel Acker | Bloomberg | Getty Images
Soybeans are harvested in Princeton, Illinois.

Farmers are hopeful about the chances of averting a costly trade war with China amid signs of progress in negotiations.

President Donald Trump tweeted twice Monday about a possible trade deal with China and how it could benefit U.S. farmers.

Trump wrote in the first tweet, "China has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products — would be one of the best things to happen to our farmers in many years!"

About two hours later, he tweeted: "Under our potential deal with China, they will purchase from our Great American Farmers practically as much as our Farmers can produce."

Over the weekend, the U.S. and China issued a joint statement on trade consultations that stated: "Both sides agreed on meaningful increases in United States agriculture and energy exports. The United States will send a team to China to work out the details."

U.S. Treasury Secretary Steven Mnuchin announced Sunday that the U.S. trade war was "on hold." That followed two days of talks last week between U.S. and Chinese negotiators in Washington.

Still, there's no firm agreement and few details from Beijing about specific amounts of goods it plans to buy. Initial reports late last week said China agreed cut its trade deficit with the U.S. by $200 billion, but Beijing also hasn't confirmed that figure.

If there is more agricultural buying from China, it could benefit not only soybeans but other U.S. agricultural commodities and be good news for Republicans as midterm elections approach.

The lion's share of the roughly $20 billion in annual U.S. agribusiness trade with China involves soybeans, which are grown in many Midwestern farm states where Trump received strong support during the 2016 presidential election. Soybeans account for $14 billion of U.S. exports to China.

Last month, Beijing threatened to slap a 25 percent tariff on the imports of U.S. soybeans. If that were to happen, it would raise the cost of American beans for Chinese buyers and make South American beans more attractive.

"I'm cautiously optimistic that the talks are going to possibly stop the tariffs, or at least they're talking about it anyway," said John Heisdorffer, a farmer from Iowa and president of the American Soybean Association. "We're looking at the possibility of things turning around here."

Soybean futures reacted positively to news of a possible truce in the trade war with China.

The July soybean contract on the Chicago Board of Trade jumped 2.7 percent Monday.

"The market is pricing in a 90 percent chance that this whole trade war and tariff idea is going to come and go without it being implemented," said James Cordier, president and head trader of, an investment firm in Tampa, Florida. He said the rise also reflected some short-covering in the futures market because "a lot of investors and producers were fearful of a trade war."

Earlier this month, there were reports that China — the world's top soybean purchaser — was curbing buying U.S. soybeans due to the ongoing trade spat with Washington. Also, the U.S. Department of Agriculture's Foreign Agricultural Service on Friday reported cancellations of export sales for 949,000 metric tons of soybeans for delivery to what it called "unknown destinations."

A soybean trade expert said it is not uncommon for sales to China to be identified as being to "unknown destinations." The USDA declined comment.

China demand for U.S. soybeans tends to slow this time of year anyway, when most of the exports to China come from South America, particularly Brazil where the crop is being harvested.

Even so, Chinese demand appears to have softened recently for Brazilian beans. And Brazilian soybeans last week were quoted at prices below U.S. cargoes.

"U.S. soybean farmers welcome the news that the United States and China have reached a general consensus on some aspects of trade between the two countries, and we look forward to learning the specifics about how U.S. agricultural trade will play an important role in improving the Sino-U.S. trade imbalance," Arkansas soybean farmer Derek Haigwood, chairman of the U.S. Soybean Export Council, said in a statement.

"Specifically with regard to soybeans, we are hopeful for a solution where Chinese importers can buy U.S. soy with confidence that there will be no negative impacts from tariffs or other trade barriers."

The U.S. sold about 33 million tons of soybeans in 2017 to China, or nearly one-third of all the beans imported by the world's second-largest economy. By comparison, Brazil shipped more than 50 million tons of soybeans last year to China and represented about 57 percent of the total imports.

"I'm a firm believer that China will continue ... to take what they committed from Brazil — and it will be tough to really boost U.S. soybean exports over the short term," said Terry Reilly, senior commodity analyst for Futures International in Chicago. He added that China has already essentially contracted out around two or three months' worth of buying, primarily from South America.

Cordier said the futures market is anticipating that China will begin buying more U.S. soybeans in the fall months when shipments from South America tend to slow.

Regardless, Heisdorffer said China shouldn't wait until the fall season to buy more American soybeans and should act sooner with a significant order as a gesture toward resolving trade differences.

"It is South America right now," said Heisdorffer. "But I think a good sign of good negotiations would be some some shipments to come from the United States here in the next week or month. That would show that this is a true negotiation between the U.S. and them."

China uses most of it for soy protein to feed roughly 700 million pigs in the country or to make cooking oil.

If there is a trade agreement with China, it could benefit other U.S. agricultural and food products targeted with tariffs.

Beef, cotton, corn and wheat are among the other U.S. agricultural products that Beijing targeted last month for possible retaliatory duties unless there was an agreement reached by the end of May. It followed the Trump administration's proposed duties on more than 1,300 imported products in China's machinery, electronics, aerospace and robotics sectors.

In early March, Trump unveiled a 25 percent duty on steel imports and 10 percent charge on aluminum imports, essentially targeting suppliers such as China. That ultimately led to China's Finance Ministry in early April to unveil retaliatory tariffs on more than 100 U.S. goods, including pork, wine, almonds and fresh fruit.

Meantime, Beijing on Friday announced it would drop its anti-dumping case against U.S. sorghum. Last month, China imposed hefty dumping duties of 179 percent on imports of the grain, which tends to be a cheaper feed alternative to corn.

After the sorghum tariff was imposed, several cargoes of the commodity bound for Chinese ports became stranded because grain handlers would have been forced to pay the hefty tariffs. Some of the sorghum shipments eventually got rerouted to Saudi Arabia, Japan and Spain.

In 2017, China bought about $1.1 billion worth of U.S. sorghum.

"We hope the dismissal of these cases reflects a lessening of trade tensions as our leaders continue to dialogue," National Sorghum Producers Chairman Don Bloss said in a statement. "Agricultural production and international trade is one of the United States' greatest success stories."

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