Soybeans bore the brunt of the impact from the trade war with China. And in the aftermath of the truce in the dispute, soybeans are still in the crosshairs of traders for a simple reason: Beans must do some heavy lifting if the deal has any hope of succeeding.
Indeed, soybean futures broke more than 20 cents in the wake of the agreement because it doesn’t guarantee anything about China’s commitment to any specific agricultural commodity. And with two years to play out, the market will need to see hard evidence of demand before buying in to boost prices.
Soybeans accounted for 59% of China’s total ag imports from the U.S. in 2017, the base year used to measure the deal’s progress. No other farm product had more than a 6% share. During the height of the trade war in 2018 China’s soybean purchases from the U.S. dropped by almost 75%. The business started to recover in 2019 as the two sides began finally to hammer out the pact but appears to have totaled less than two-thirds of what it was two years ago.
Daily and weekly news about China’s purchases will be tracked like those big thermometers used in community fund drives. Trouble is, unlike the amount needed for a new fire engine or library addition, the deal doesn’t have a specific goal for soybeans or anything else. Only the total matters: $12.5 billion above the 2017 baseline in 2020 and $19.5 billion more in 2021.
In all, the deal is supposed to bring Chinese purchases of agricultural goods to $80 billion. That total appears to include forest products in the total for ag, even though those are categorized as “other manufactured goods” according to the text of the deal released to the public. “China will also strive to purchase an additional $5 billion of agricultural products annually,” the summary of the pact says.
Another sentence caught they eye of traders and contributed to beans’ selloff: