With tensions rising between the U.S. and China in the last ten days, questions are mounting regarding China’s ability to meet its Phase One trade deal obligations. China provided a major shot across the U.S. bow early Monday (June 1) when Reuters reported that President Xi had instructed Chinese state-owned COFCO and Sinograin to quit purchasing pork and soybeans from the U.S.

There has been real debate on whether this is a real thing or just a threat to shake the U.S. markets and U.S. President Donald Trump. Soybean futures finished down slightly to 840’6 for July, while lean hogs were down 2.250 to $54.60 in June.

On Friday, President Trump threatened adding sanctions on China and Hong Kong with limited details of the implementation. Both countries seems to heightening the verbal threats in each direction which is creating some nervousness in U.S. farm country.

Arlan Suderman, of INTL FC Stone, tweeted on Monday that, “Just got off the phone with our office there. They expect that to be temporary. Supplies are adequate near-term due to current shipments, giving China freedom to threaten.”

For many that believe that China will buy when it needs to buy, this situation is similar to how China flexed its muscle on Australia three weeks ago and with Canada on canola 18 months ago.

Canadian soybeans don’t really have much of a chance to fill a U.S. gap as South America is cruising as the preferred supplier. Any pauses in U.S. pork purchases would be an opening for Canadian pork exports into China as the Asian nation still has the African swine fever protein void to deal with. As of yet, there has been no clear direct ramifications against Canada for last week’s B.C. Supreme Court decision, and that is seen as a real positive for Canadian exportable commodities.

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