China set to buy 40% more U.S. farm products…or will they?

In a relatively short period of time the potential U.S./China trade war has shifted to becoming a “trade truce.” In potentially very good news for U.S. farmers, agricultural commodities could be one of the major beneficiaries.

President Donald Trump is demanding an additional $25 billion in U.S. ag exports to China, USDA Secretary Sonny Perdue said, but also cautioned that it couldn’t happen immediately. The two countries would need between two and five years to ramp up trade to that level, Perdue told a gathering of reporters, according to AgriPulse.

This would be good news for U.S. farmers, but not all Republicans are as optimistic. Senator Ben Sasse (R-NE) feels that the trade strategy in China lacks clear vision, “a bilateral strategy without clear goals that just always has the risk of either intentionally or accidentally drifting into a trade war — that doesn’t help us, that doesn’t solve these problems.”

Any deal with China that includes more agricultural exports is a deal farmers will no doubt cheer. It is the details that are missing at this point although that has not stopped President Trump from claiming an early victory in several tweets on Monday, May 21st.

By Wednesday the president was already backing off his unshackled bullishness on the deal with China by speaking to the complexity of the structure of the deal they were working on.

Trump was not the only member of the administration this week trying to bring farmers back to earth. USDA Under Secretary of trade and foreign agriculture, Ted Mckinney, stated, “I am cautiously optimistic. I do not want people to get too overly excited.”

What has the impact been on the markets?  

China currently purchases a quarter of the U.S. soybean crop so when you think China, you think soybeans. November soybeans were up the first three days since the Trump tweets on China trade began but closed down on Thursday after being higher most of the day.  Ted Seifried, Zaner Ag Hedge told Shaun Haney on RealAg Radio on Tuesday, “I think we are headed for more soybeans in the U.S. and I think USDA is overstated on its demand and therefore I think the balance sheet in the fall could be bigger than we thought come this fall.”

Listen to Ted Seifried and Shaun Haney from May 22nd’s RealAg Radio (31:10 mark)

Most traders and analysts are looking for greater particulars on increased trade to China before they are convinced that this market is headed higher on the China factor.

Lean hogs are appear to be even more skeptical of the immediate trade impact of a U.S./China deal.

Seifried told RealAg Radio, “Hogs have the most to gain from this potential China deal. The hog market is taking a wait and see attitude, saying hey China we have seen this before. We are trading a very large premium in the future to the cash market at this time and that is a limiting factor.”

Download the RealAg Markets App for market prices and information

After two down days following the Trump/China trade tweets, August lean hogs returned to the upside on Wednesday and Thursday but are still down on the week.

Farmers, traders, and the industry are all watching very closely as the Trump administration attempts to bust open the Chinese market for agricultural commodities exports while also busting up past Chinese intellectual property theft practices. Farmers especially will be looking for increases to pork, beef, dairy, and soybean exports. President Trump is making big promises — whether he delivers is still up in the air.

 

RealAgriculture News Team

A team effort of RealAgriculture's videographers and editorial staff to make sure that you have the latest in what is happening in agriculture.

Trending

Wheat prices jump into August — This week in the grain markets

This week, winter wheat prices touched a three-year high, but it didn’t last. Chicago SRW wheat prices for September 2018 gained 5 per cent or about 26 cents US/bushel to close at $5.56. While the December 2018 contract was up 5.4 percent — or nearly 30 cents — to finish a tad under $5.80. In…Read more »

Related

Leave a Reply

 

This site uses Akismet to reduce spam. Learn how your comment data is processed.