Soybean farmers are expressing optimism as negotiations between the United States and China appear to be progressing, potentially reopening the Chinese market for U.S. soybeans. Scott Bessent, a financial expert, indicated over the weekend that he expects Chinese soybean purchases as part of a trade agreement to be “substantial.” This optimism has led to a surge in soybean futures, which have increased nearly 3% over the past few days, marking their highest levels in over a year.
Historically, China has been a significant importer of U.S. soybeans, purchasing between $12 billion and $17 billion worth annually. However, purchases have plummeted to zero as Beijing seeks to exert pressure on Washington. Arlan Suderman, chief commodities economist at StoneX, noted that the market is reflecting cautious optimism, as stakeholders hope for significant progress in negotiations after a long period of stagnation.
The backdrop for this renewed hope is the previous phase-one trade deal made during President Donald Trump’s first term. Under this agreement, China had committed to buying an additional $200 billion in U.S. goods and services over 2020 and 2021, although fulfillment of this agreement fell short due to the impacts of the pandemic. Suderman remarked that China only purchased about 58% of the agreed amount during that period, leading to a sense of caution amidst the current positive outlook.
According to Allen Featherstone, head of the Agricultural Economics department at Kansas State University, reopening the Chinese market would be a significant achievement for U.S. soybean farmers. He emphasized the importance of securing purchases quickly, as the harvest season has concluded and farmers can only store crops for a limited time. With China having sourced soybeans from South America, timing remains a critical factor in any potential deal.
Bessent further highlighted that negotiations have seen the U.S. effectively remove the threat of additional 100% tariffs on Chinese goods, which has contributed to a more favorable environment for discussions. Additionally, fears of Chinese export controls on rare earth materials have also been alleviated.
As part of the ongoing negotiations, President Trump is set to meet with Chinese President Xi Jinping later this week in South Korea to discuss the details further. The administration is also considering a bailout for farmers who have faced financial losses stemming from the trade war. Kevin Hassett, director of the National Economic Council, indicated that plans for a payout are in motion, although specifics have yet to be released.
For soybean farmers, the prospect of renewed trade with China offers a glimmer of hope amid a challenging landscape. The upcoming discussions between U.S. and Chinese leaders could prove pivotal in shaping the future of soybean exports, which have faced significant challenges in recent years.
