Caixin
Nov 20, 2019 03:08 AM
ECONOMY

Global Soybean Market Watches U.S-China Trade Deal for Direction

Photo: A truck unloads imported soybeans from Brazil at the port of Nantong in east China’s Jiangsu province. Photo: VCG
Photo: A truck unloads imported soybeans from Brazil at the port of Nantong in east China’s Jiangsu province. Photo: VCG

U.S.-China trade talks have made positive progress, boosting global soybean prices, but continued uncertainties could lead to volatility, China’s agriculture ministry said in a report released Monday.

Soybean market sentiment was bolstered by a “substantial phase one” deal reached at the latest round of negotiations in Washington in early October, including a commitment for $40 billion to $50 billion in Chinese purchases of U.S. agricultural products.

The most active soybean futures traded on the Chicago Board of Trade (CBOT) had an average settlement price of $341 a ton in October, up nearly 7% from September and the same month last year, according to the monthly report posted on website of China’s agriculture ministry.

A monthly report by the U.S. Department of Agriculture (USDA) also showed the soybean export price in October increased $22 from September to $345 a ton.

However, mixed signals from both sides on the trade deal so far this month have left investors directionless.

Officials from both countries said earlier this month that the two sides reached an agreement on a tariff rollback, but U.S. President Donald Trump later said he had not agreed to scrap tariffs on Chinese goods.

Last Tuesday, Trump told business leaders in New York that he would continue to raise tariffs on China if talks fell through, which he said remained a possibility.

After the contradictory comments, Chinese Commerce Ministry spokesperson Gao Feng said at a routine press conference Nov. 14 that the two countries are having in-depth discussions on the extent of tariff elimination.

China and the U.S. had “constructive talks” on trade on a high-level phone call Saturday, state media Xinhua reported. China’s Vice Premier Liu He, U.S. trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin discussed each other’s core issues for the first phase of an initial trade agreement, according to the report.

Neither side gave details on the discussions or timing of a possible deal.

Pressured by the ambiguous outlook, CBOT soybean futures declined slightly Monday. January soybean futures ended 8 cents lower at $9.10 a bushel, the lowest since Sept. 30.

With no definite finalization of a trade deal, soybean market sentiment is bound to fluctuate, a soybean trader told Caixin.

Meanwhile, China is buying more soybeans from the U.S. In the 2019-2020 marketing year as of Nov. 7, U.S. soybean orders from China reached 7.9 million tons, of which 3.15 million tons have been shipped and 4.75 million tons still waited to be shipped, compared with less than 1 million tons of orders from China the same period last year, data from the USDA showed. The U.S. soybean marketing year starts Sept. 1 and ends Aug. 31 of the following year.

An expert panel at China’s agriculture ministry expects soybean imports in the 2019-2020 marketing year to reach 86.2 million tons, an increase of 3.59 million tons from a year ago, also up 2.2 million tons from an October estimate, according to an article published on the ministry’s website Nov. 8.

Before the trade war, the U.S. was the biggest source of soybean imports, supplying about a third of China’s purchases. During the first nine months of 2019, about 70% of China’s imported soybeans were from Brazil, and the U.S. accounted for only about 16%, data from China’s customs showed.

Contact reporter Denise Jia (huijuanjia@caixin.com)

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