China's purchases of U.S. soybeans appear to have stalled less than two weeks after the United States announced a wide-ranging trade truce that signaled warming relations between the world's two largest economies.
After a flurry of orders late last month – the first of this season – Chinese imports of US cargo appear to have stalled, according to traders who asked not to be identified discussing confidential information. They said they didn't know about new supplies. The pause adds to uncertainty about whether the largest consumer of U.S. soybeans will import as much as U.S. President Donald Trump's administration expects.
The agreement with China was seen as crucial to helping struggling American farmers, who have been hit hard by inflation and high input costs. China has held off buying U.S. soybeans for much of this season, hurting producers while giving Beijing a key bargaining chip in negotiations with Washington. US trade turnover with China last year amounted to more than $12 billion.
Soybean futures rose in the weeks leading up to the deal but have faltered since then amid concerns about a lack of information about Chinese buying. Futures were little changed on Wednesday.
Washington said Beijing had pledged to buy 12 million tons of soybeans by the end of this year and then buy 25 million tons annually over the next three years. China has yet to confirm the specific purchase commitments mentioned by Trump's team, but Beijing has cut tariffs on U.S. soybeans and lifted import bans on three U.S. exporters, including CHS Inc., reciprocating similar conciliatory moves by the United States.
“Many in the industry view China's reported intention to buy 12 million tons of U.S. soybeans as more of a diplomatic gesture than a firm trade deal,” said Kang Wei Cheang, an agricultural broker at StoneX Group Inc. in Singapore.
China has spent the last few months buying huge quantities of South American beans in an attempt to diversify its sources. As such, demand in China is expected to weaken in the coming months regardless of the trade deal with the US, according to Vitor Pistoia, senior grains and oilseeds analyst at Rabobank.
Chinese processors will have to cover some supplies in December-January before supplies of the new crop from top exporter Brazil become available, but these are expected to be only a few million tons, according to some industry estimates. That would still put the need for U.S. cargo well below the procurement target Washington is talking about for this year.
What's more, traders say U.S. soybeans are still subject to a 13% tariff and would incur large losses in processing, leaving Chinese commercial processors with little incentive to book U.S. cargo.
U.S. soybeans are also trading at a premium to South American beans, in part due to a jump in prices since the trade deal was announced, according to StoneX's Cheang.
With Brazil's planting season going well and new crop shipments expected by late January to early February, Chinese buyers are reluctant to source large volumes from the U.S. for short-term supplies, he said.
Recent purchases of U.S. soybeans were made by Chinese state-owned companies, most of which may have been destined for government reserves, traders said. For commercial buyers, the trade truce has reopened the field to American supplies, which now must compete with Brazil for a sales window that is quickly disappearing.
