Trade Truce

Soybean growers received positive news last week. First, it was reported China purchased at least three and maybe more cargoes of U.S. soybeans, the first purchases in several weeks. The second bit of positive news was the announcement of a partial truce in the trade conflict between the U.S. and China. As part of the truce, China agreed to purchase a minimum of 12 million metric tons (mmt) of soybeans yet this year, 25 mmt each year for the next three years, and will lower the tariff rate on U.S. soybean imports.

U.S. soybean exports to China during the 2024/25 marketing year (ending August 31) were estimated at 22.6 mmt according to Karen Braun with Zaner Ag Hedge. Average exports to China over the past five years were 28.9 mmt. So, in effect, the deal returns the relationship between U.S. and China, at least as it concerns soybean trade, to where it was prior to the latest escalation in the trade conflict. The deal is not yet signed, and not all details are known, so a risk exists that something could still go wrong. Nevertheless, the truce offers soybean producers some stability, maybe a firming of the local basis as soybeans begin to move, and perhaps time over the next few years to find alternative markets and usage to China.

FIGURE 1. U.S. Soybean Exports to China (million metric tons)