China Makes Biggest US Soybean and Pork Purchases This Year
The quite unexpected move by Chinese firms to buy 600,000 metric tons of soybeans from the United States is widely being seen as another indication China wants President Donald Trump to ratchet=down his trade war by making a similar gesture.
Media reports in the U.S. confirm Chinese traders bought at least 10 boatloads of U.S. soybeans on Thursday. The massive buy is equivalent to more than 600,000 tonnes and is the largest by Chinese private importers in more than a year. Soybeans are the most valuable U.S. farm export while China is the world's top buyer of soybeans.
The American soybean exports will be shipped from U.S. Pacific Northwest export terminals from October to December. The purchase is also China's most significant since June, according to traders.
The purchase, whose value was not revealed, comes ahead of high-level talks after October 15 aimed at ending a ruinous trade war triggered by President Donald Trump on March 2018.
Also on Thursday, the U.S. Department of Agriculture (USDA) confirmed China bought 10,878 metric tons of U.S. pork in the week ending September 5. This is the largest pork purchase in a single week since May and comes amid a devastating outbreak of African swine fever estimated to have killed a third of China's entire pig population. China made the buy despite a hefty 72% tariff.
The benchmark Chicago Board of Trade soybean futures jumped to one-month highs on the news. The actively traded November contract SX9 then staged its strongest rally since May.
The soybean deal is the largest among private Chinese importers since China increased import tariffs by 25% on U.S. soybeans in July 2018 in retaliation for Trump's duties on Chinese goods. Duties were raised an additional 5% this month.
China's soybean purchases over the past year were made almost exclusively by state-owned Chinese firms, which are exempt from the steep import tariffs.
Analysts believe the soybean purchases are another indication of trade tensions between the U.S. and China might be cooling down. The dialing down of tensions favors Trump, who is desperate for a political win to salvage his dim chances of winning re-election in 2020.
Also this week, China renewed its promise to buy U.S. agricultural goods such as pork and soybeans. Large agricultural product purchases are a key U.S. demands for a trade deal, but both sides remain far apart on other key issues such as intellectual property rights and structural changes to China's economy.
"I'm impressed that the day they allow their commercial interests to come back and buy from the United States, where we've got this much sold immediately," said Jack Scoville, a vice president with Price Futures Group in Chicago.
"Clearly, they're trying to show what they can do if we get back to somewhat of a normal trade relationship."