A recent meeting between President Donald Trump and Chinese Premier Xi Jinping resulted in an agreement on a resumption of China’s U.S. soybean purchases. The expectation is that China, between now and the end of January, will buy 12 million metric tons of soybeans. The expectation is that they will purchase 25 million metric tons from 2026 through 2028. Those numbers would be typical purchase levels from a few years back. Joe Janzen, an agricultural economist at the University of Illinois, talks about what this might do to the marketplace, and how it might impact trade and trade balances across the planet.
“We’re still processing. This is sort of very new and a relatively vague announcement. It’s a few numbers in comments from the Treasury Secretary that the market has run with. It’s important to note that, prior to Secretary Bessent’s comments coming out, a lot of people in the market thought that the meeting was actually rather disappointing, and soybean prices had fallen overnight pretty substantially, about 30 cents per bushel. All of that has been reversed, and I think there’s a sense of optimism about the potential for renewed U.S.-China trade. However, it’s important to note that this is getting back to where we were in 2022-23-24, not going to a higher level of U.S.-China soybean trade than we’ve seen in the recent past.”
For this marketing year, it appears China will purchase 12 million metric tons. If you put that into the balance sheets, does it change what the export numbers look like from USDA from the month of September?
“It’s hard to say because you have to make a bunch of assumptions about what’s going to happen with the soybean trade between the U.S. and every other trading partner. You would think that if all of that 12 million metric tons accrued this year, that could sort of materially move the export number on the U.S. soybean balance sheet. But it’s just as easy to think that the United States was going to have a difficult time getting to what we expected about trade, maybe a couple of months ago, which was about 1.6 billion bushels of U.S. exports of soybeans to all countries. I think this is sort of in line with that number. It doesn’t maybe move that number as much as one might think.”
He said that likely means expectations remain the same for this marketing year.
“The other part of this is just the level of uncertainty. I’ve heard it called sort of like subscription diplomacy, that everything that we get in terms of news about international trade policy tends to be really short-term, and I think the market is going to need to see something material, either in terms of data on actual shipments over the next few months, but probably something much more concrete on paper as well, in terms of an agreement between the United States and China around trade and soybean trade specifically, before we really see a move to substantially different price levels than what we’ve got right now.”
If that is the case, the U.S. may not see similar numbers to Phase 1 of the trade agreement in the first Trump administration.
“If you’re going back to that Phase 1 trade agreement, the numbers were, in part, vague because they were dollar value targets that applied to all agricultural commodities, and there were lots of pathways by which China could have potentially complied with that agreement. Ultimately, the thing to note about what happened during the first Trump administration was that commercial circumstances changed, and China didn’t end up following through on their commitments, which didn’t really have any spelled-out consequences in the agreement. And that sort of seems to be likely again, that we won’t see an agreement that specifies what happens if China doesn’t import these specific numbers stated by the Treasury Secretary.”