China agreed to purchase a ‘very substantial’ amount of American ag product
By Diego Flammini
Staff Writer
Farms.com
Soybean markets are reflecting the positive discussions U.S. President Donald Trump and Chinese President Xi Jinping had during the G20 in Buenos Aires, Argentina on Saturday.
The two leaders agreed to a trade truce. The U.S. won’t raise tariffs on US$200 billion of Chinese product from 10 percent to 25 percent, and China agreed to purchase a “very substantial” amount of agricultural, energy, industrial and other products from America, the White House says.
As a result, soybean prices opened today at US$9.19 per bushel. This rate is the highest price for the commodity since the end of July when farmers could earn about US$9.07 per bushel.
A potential deal between China and the U.S. is good news for soybean producers but the details will reveal the true benefits, said Moe Agostino, chief commodity strategist with Farms.com Risk Management.
“This could be the start of a Christmas rally,” Agostino said to Farms.com. “Trump said he won’t raise tariffs if they can reach an agreement within 90 days. Well, what if they don’t? China agreeing to buy more U.S. ag (products) is great, but I think we’ll have to see the elimination of tariffs for (China) to do that.”
These conversations are happening at a critical time in the production calendar.
Brazil will begin to export its soybeans in the next 30 or 60 days, so completing a deal within that window could be another victory for U.S. ag, Agostino said.
“It’s an opportunity to win back some of the business we lost in April,” he said.
From an individual producer standpoint, marketing the January soybean crop now may not be the best option.
Waiting until early 2019 could give farmers a better chance to receive a higher price, Agostino said.
“I would be patient and give it until the new year,” he said. “You’ve got some good news with the U.S. and China, and also there’s a January crop report from the USDA that should report lower yields because of very wet, cool and delayed harvests that have impacted quality.”
Soybean growers are pleased with the progress the U.S. and China are making.
Reaching an agreement with America’s largest soybean customer is crucial for the industry, said John Heisdorffer, president of the American Soybean Association.
“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,” he said in a statement today. “We want to begin repairing damage done to our trade relations with China, which has been essential to successful soybean exports for years.”