China Is Buying Soybeans Again as Trade Talks Resume



Josh Zumbrun, Michelle Hackman | Wall Street Journal

WASHINGTON—The long-frozen U.S.-China trade talks are showing signs of a possible thaw, as a Chinese trade team returns to Washington and Chinese commodity buyers return to America’s soybean market.

Farm exports, new purchasing deals and prices have all been climbing again in recent weeks. Reports from the Commerce and Agriculture departments last week showed China making some of its largest purchases in over a year.

“Soybeans are a barometer for how the whole thing is going,” said Jim Sutter, chief executive of the U.S. Soybean Export Council. “I think we’re just now building up momentum again.”

Even so, these purchases will need to continue well after this week’s talks to lead to a sustained recovery for U.S. farmers, a key constituency for President Trump that has been battered hard by the trade war.

U.S. negotiators might need to give ground to keep the purchases coming, including easing some restrictions on Huawei Technologies Co., the Chinese telecommunications giant that the U.S. has identified as a national security risk, said Michael Hirson, the practice head for China at the political-risk consulting firm Eurasia Group.

“I think to keep the ag purchases, the likely concession on the U.S. side is postponing these upcoming tariff increases, and some kind of modest gesture on Huawei,” Mr. Hirson said.

Talks between the two countries hit an impasse in early May; while talks have continued, little progress has been made toward an accord.

The one recent bright spot has been Chinese agricultural purchases. Chinese buyers bought more than 1.5 million metric tons of U.S. soybeans in the last week of September alone, according to USDA data, some of the biggest purchases in over a year.

In August, China purchased almost $1.5 billion of total agricultural exports, including $945 million of soybeans, according to a Commerce Department report, the best month since January 2018.

The figures are some of the most encouraging since the U.S.-China trade war got under way.

In an interview with The Wall Street Journal, Agriculture Secretary Sonny Perdue said the purchases were a good start but “we always would like to see more.”

Purchases are still far below their peak; before the tensions, in 2017, China was buying about $15 billion a year of soybeans.

Mr. Perdue also noted that agricultural purchases alone won’t solve the trade war, which the U.S. launched to correct what it said were Chinese restrictions on U.S. businesses.

”It’s going to require some structural reform within China, not just purchasing,” Mr. Perdue said, “I think China probably would be more willing to buy their way out of this issue rather than do the structural reforms on nontariff issues that they’ve had.”

Beijing contends that the U.S. is trying to arrest its advancement on the global stage, and has responded to U.S. tariffs over the past year with tariffs of its own on U.S. agriculture and a sharp reduction in its farm purchases.

Those measures deepened the wounds in an already-struggling U.S. farm belt, which was wrestling with a build-up of debt, growing competition from Brazilian and Russian agriculture exporters and particularly soggy weather conditions in 2019 that disrupted planting.

Agriculture Secretary Sonny Perdue, wearing a cap, at a farm show in Illinois in August. ‘We always would like to see more,’ he said of China’s purchases. PHOTO: DANIEL ACKER/BLOOMBERG NEWS

As negotiators resume high-level talks for the first time since July, both sides face the prospect of economic damage if the discussions go badly. China could again slam the brakes on purchasing, while the U.S. could proceed with a tariff hike, raising duties to 30% from 25% on nearly $250 billion of goods, an increase currently scheduled to take effect Oct. 15.

Deputy-level U.S. and Chinese officials are set to meet in Washington on Monday and Tuesday, followed by talks between Mr. Trump’s top negotiators, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, and China’s top trade envoy, Liu He, beginning Thursday.

Few are watching the talks more closely than U.S. soybean farmers.

When trade tensions erupted early last summer, the price of soybeans dropped by nearly $2 a bushel. The market has yo-yoed with the ups and downs of the talks ever since.


Do you think China’s purchases will continue and help stabilize the farming industry in the U.S.? Why or why not? Join the conversation below.

The U.S. and China struck a tentative truce in November, which stabilized the market, but when those talks broke apart in May this year, prices fell to nearly $8 a bushel, a 25% decline from prices seen in early 2018, before the trade war began.

Spirits had been buoyed in the spring when the U.S. and China appeared to be nearing a deal, but then fell apart.

“We were all pretty optimistic in April,” said Mr. Sutter. “It looked like a large scale agreement, but that didn’t turn out to be the case.”

The recent spate of buying has pushed soybean prices back above $9 a bushel for the first time since talks ended in Shanghai in July.

China has purchased $9.2 billion of total U.S. agricultural exports, including $4.7 billion of soybeans, in the 12 months that ended in August. That’s a $2.5 billion rebound in total farm goods, and about a $2 billion increase in soybeans, compared with the comparable figure in April, but it is still deeply depressed compared with purchasing levels before the trade war began.

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