China has agreed to purchase additional US soybeans. That’s one tidbit of good news for US soybean farmers this week. The other tidbit comes from the USDA’s “data dump,” that shared the numbers from the last six weeks. Data show the Chinese made several large soybean purchases. Where will we end up for the 2018 marketing year? And how costly has this trade war been for US soybean farmers?
Buying More Beans
Marjorie Kulba of Drovers reported a “Breaking Update” in regard to the trade talks with China. US Ag Secretary Sonny Perdue tweeted that Chinese officials have agreed to buy an additional 10 million metric tons of US soybeans.
BREAKING: In Oval Office meeting today, the Chinese committed to buy an additional 10 million metric tons of U.S. soybeans. Hats off to @POTUS for bringing China to the table. Strategy is working. Show of good faith by the Chinese. Also indications of more good news to come.
— Sec. Sonny Perdue (@SecretarySonny) February 22, 2019
Chinese officials met with President Trump in the Oval office on Friday. Talks have been ongoing on all week, and now, have been extended through the weekend. Trump appears somewhat optimistic about the talks.
“I would say it’s probably more likely that a deal does happen, but that doesn’t mean it’s going to happen.”
The two sides are working hard to meet the March 1 deadline, when additional tariffs on billions of dollars worth of Chinese goods go into effect.
March 1 Deadline Extension is a Possibility
Trump has mentioned that he is considering extending the March 1 deadline. Larry Lee of Brownfield Ag News also covered the breaking news story Friday. Trump says he may hold off on the tariffs if the two sides are close to making a deal.
The President told reporters they’re going, “Very deep into the trade and covering items that a lot of people wanted to cover and nobody thought we would ever get to.”
Lee reports that the Chinese are also optimistic about the possibility of an agreement. Through a translator, Chinese Vice Premier Liu said,
“We believe that it is very likely that it will happen and we hope that we’ll have a deal. The Chinese side is ready to make our ultimate effort.”
USDA “Data Dump” Shows Large Soybean Purchases by Chinese
The announcement that China will purchase more US soybeans comes shortly after the USDA’s “data dump” which filled in some of the knowledge gaps that formed during the government shutdown. Export sales from the last six weeks were finally released, and the data show large purchases from China. Bryce Knorr of Farm Futures says that the Chinese are “bulking up” on US soybeans.
In the last six weeks, China bought 144 million bushels of US soybeans, 60% of the 240 million in old crop business done during the period. That brought China’s 2018 soybean commitments up to 20% of the 1.356 billion bushels done so far. This is still significantly below where we’re usually at (60%), but it’s a big improvement nonetheless.
Where Will We End Up for the 2018 Marketing Year?
Knorr says it’s difficult to predict where we’ll end up for the 2018 marketing year.
Just what today’s numbers mean for what China could do going forward – and how that could affect total exports for the 2018 marketing year — remains unclear. The slow start to sales during the trade war mean commitments must be stronger than normal in the second half of the marketing year, a time when soybeans from Brazil and Argentina typically dominate China’s imports.
While all of the above is very good news, we are still facing a very challenging situation. The USDA has lowered its forecast of 2018 crop sales to 1.875 billion bushels. That leaves us with 519 million bushels left to sell. Averaging it out through the remainder of the marketing year means that we need to sell 18.5 million bushels of soybeans a week- double the average of what we’ve typically done in the last five marketing years. Even with the lowered USDA estimates, it’s doubtful we will see those kinds of numbers.
Trade War Costly to US Soybean Farmers
Callum Burroughs of Business Insider reports that 25 million tonnes of US soybeans will go unsold in 2019 thanks to the trade war with China. Burroughs, like Knorr, references the USDA data. So far, the US has sold 13.5 million tonnes less soybeans to China this year. As a result, stocks have risen dramatically and will likely double by the end of this year.
Robert Johansson, the chief economist of the USDA estimates that the trade war with China cost US soybean farmers $7.9 billion in 2018.
“The record-high stocks in the US due to the trade situation will take several years to unwind, which will weigh on US prices going forward even with potential China purchase agreements,” Johansson said in prepared remarks.
Until 2017, China was the largest buyer of US soybeans. Now they’re fifth. Alfred Evans, founder and CEO of Islan Investments sums it up best.
“Trump’s tariffs might be a time limited event but the change in trading patterns they prompted for China may persist long after the trade war is over.
The trade war has been costly to US agriculture- especially soybean farmers. It’s difficult to predict where we will end up for the 2018 marketing year, but it’s likely we’ll see very high soybean stocks for several seasons to come. There are a couple of bright spots. China has agreed to purchase additional soybeans, and thanks to the USDA “data dump” we have a much clearer picture of what’s going on. Let’s hope a deal is made soon.
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