(Bloomberg) -- U.S. farmers are pleased that Donald Trump and Xi Jinping agreed to a trade truce, but they’re not rejoicing just yet. That won’t come until they see ships full of their soybeans headed to China.
“The bottom line is: what are the details?” said Sharon Covert, co-owner of a farm in North Central Illinois with 500 acres of soybeans. She’s one of several farmers interviewed Monday with a wait-and-see attitude on the truce.
David Rodibaugh, a soybean grower in Rensselaer, Indiana, was happy to hear about the truce, he said, but was “taking it with a grain of salt” until he sees actual sales. He and scores of other U.S. farmers have stashed away more bushels than usual to wait out the trade war and sell at higher prices.
Midwest soybean growers have been caught in the crossfire as the U.S. and China argue over intellectual property, steel and cars. Amid the tit-for-tat tariffs, China shunned U.S. soybeans, buying instead from Brazil and Argentina. That upset trade flows developed over decades and dropped U.S. prices at a time when farmers were reaping a record crop.
“I want to see ships sent to China with U.S. beans on them so we can avoid losing market share,” Rodibaugh said in a telephone interview.
Positive but still cryptic signs have appeared. After the dinner in Argentina, the White House said China will begin buying commodities immediately from the U.S. again without any details. Then, Trump followed up with a tweet saying that farmers would be “very BIG and FAST” beneficiaries.
Speaking at an event in Chicago on Monday, U.S. Agriculture Secretary Sonny Perdue said he expects Chinese crop purchases to resume around the first of the year, probably starting with the purchase of soybeans. He said he didn’t know how much China will import, but expressed doubt that South America will be able to supply all of China’s demand.
“It means a lot for North Dakota farmers if we can get trains rolling and ships out of the Pacific Northwest,” said soybean grower Matt Gast, who was harvesting corn while keeping an eye on futures prices in his combine. “We’ve got beans. Let’s get them rolling.”
Gast and his family, which grows several thousand acres of corn and soybeans near Valley City, North Dakota, are storing about 60 percent of their soybean harvest this year compared to 10 to 15 percent in the past as the drop in exports drove prices lower.
Global inventories of soybeans in the U.S. and around the world have been expanding. Meanwhile, the trade war has driven China to buy supplies from Brazil while African Swine Fever hitting hog herds in the Asian country has made demand for feed even more uncertain.
Farmers such as Covert and Rodibaugh want to know if China’s retaliatory tariffs on soybeans and other U.S. agricultural products will continue? What will China’s biotech and phyto-sanitary regulations look like going forward? Most importantly, will the country start buying again from the U.S.?
Agricultural heavyweight Cargill Inc. said the U.S. may have missed a bulk of the window to sell soy to China. The country usually buys three months ahead, Dave Baudler, managing director of North America grain for Cargill, said at a conference in St. Louis on Monday. China usually buys heavily from the U.S. as it harvests crops between September and December and then shifts to South America starting in January and February.
It’s hard to overstate how important China is for the soybean world including for the U.S. China is the biggest global consumer by far, using the oilseed as a protein in livestock feed as well as for cooking oil, and has been until this year the biggest buyer of U.S. supplies. U.S. soybean acreage in several parts of the country including North Dakota has grown to meet demand from China.
In September, as farmers began to rev up combines during the earliest part of the harvest, most-active soybean futures fell to $8.12 1/4 a bushel, the lowest since December 2008. Cash prices in some parts of the country including North Dakota have been much worse, falling below $8 a bushel as China stopped buying.
After the trade truce was announced after Trump and Xi met over dinner in Argentina, most-active soybean futures in Chicago spiked as much as 3.2 percent to $9.23 3/4 a bushel when the market opened in Chicago Sunday. That’s the highest price for a most-active contract since June, before China’s retaliatory tariffs went into effect in July, but the market has pared its gains on Monday.
Illinois soybean farmer Daryl Cates took advantage of the rally and sold some soybeans on Sunday but he’s worried about next year.
“I wasn’t as concerned with this year’s crop as I was that this tariff would stay on for next year’s crop,” Cates said. “I’m hopeful that this is just the beginning to get everything taken care of.”
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