Chinese Buyers Not Following Through on US Soy Purchases After Partial Trade Agreement

WASHINGTON, D.C. – Despite the partial agreement announced by President Donald Trump by which China would resume purchases of U.S. soy, the largest crop by acreage in North Carolina, China has thus far failed to step up the purchases, electing to buy more Brazilian soy instead. While Brazil is the largest supplier of soy to the Chinese market overall, Chinese buyers typically flow to the U.S. from October through January for the harvest.

From the Wall Street Journal:

“[…] Trump said on Twitter on Sunday that China has already begun making U.S. agricultural purchases. But three U.S. soybean exporters said there have been no U.S. sales to China since last week’s talks in Washington, and none have been confirmed by the U.S. Department of Agriculture.

“I’ve not had any inquiries at all for U.S. (shipments),” said one of the U.S. soybean exporters. “There were a few November boats bought from Brazil and several new-crop South American boats for March forward but nothing here.”

Another U.S. exporter said a drop in Brazilian soybean prices sparked fresh demand from commercial soy importers that have been unable to profitably import American soybeans for more than a year unless given tariff waivers.

State-owned firms COFCO and Sinograin, which are exempt from the 25% retaliatory duties on U.S. imports, have “little appetite” to buy unless U.S. prices drop further, the second U.S. exporter said. […]”

Market forces, as mentioned above, could be pushing these buyers south. While all the headlines focus, naturally, on the high level state tradecraft it comes down to individual buyers. Even if those buyers are state-owned enterprises, they’ll react to market prices accordingly. To that end, the multiple rounds of reciprocal tariffs have saddled U.S. soy with a 25 percent tariff, making Brazilian soy prices even more attractive.

The uncertain return of the Chinese buyers is likely on the minds of soy farmers in North Carolina and across the nation, especially as the harvest begins. The agreement reportedly amounted to 38.6 billion pounds of soy, at a total approximate value of $50 billion. North Carolina farmers exported about $321 million in soy in 2018, much of it to China. In 2018 the Old North State as a whole did about $2.3 billion in exports to China.

Whereas China had offered tariff waivers to some big soy buyers previously, they may have used them up already. Perhaps as the U.S. supply balloons as the harvest comes in, market forces will pull the buyers back in. Either way, the tradecraft will continue between the world’s two largest economies with no real end in sight.

Read more about the soy agreement at Wall Street Journal.