Farmers across Eastern Iowa and the United States woke up Monday to a rally in soybean prices in the wake of a highly watched meeting between President Donald Trump and Chinese President Xi Jinping. But it’s not clear if an announced halt on tariffs will revive grain trade between the two major economies.
Bloomberg’s generic soybean futures price broke $9 per bushel at the start of trading Monday, the first time since June, on news that Trump and Xi had agreed after meeting at the G-20 Summit in Argentina over the weekend to halt new tariffs on each other’s countries and hold trade discussions over the next 90 days.
The generic price closed at $9.05 per bushel at the Chicago Board of Exchange.
The White House said Beijing agreed to start purchasing a “not yet agreed upon, but very substantial, amount of agricultural, energy, industrial and other product from the United States” immediately.
Corn prices also rose to close at $3.82 per bushel Monday, buoyed by the rise in soybean prices.
That could provide some relief to U.S. farmers who have stockpiled the most soybeans in a decade — some 87.9 million bushels — in their bins and grain elevators. The bet is that a reprieve in trade tensions would boost prices held down by disappearing demand from China, which imports 60 percent of soybeans traded worldwide.
Soybean prices have jumped on hints from Trump on trade policy before. On Nov. 1, Trump tweeted that he had “a long and very good conversation” with Xi focused heavily on trade, and generic soybean prices closed the day at $8.82, a 31-cent increase.
About two weeks later, he told reporters there may not be more tariffs on China, resulting in a 24-cent price spike.
But Chinese buyers have yet to resume purchasing U.S. soybeans. The U.S. Department of Agriculture reported no weekly exports for the week ending Nov. 22 this year, compared to 1.7 million metric tons exported that same week last year.
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Jim Nemitz, president of Midwest Strategic Investments in Hiawatha, said farmers and commodity traders have clung to any news signaling a softening in the trade dispute. While the outcome of the G-20 meeting in Argentina inspired optimism from those groups, Nemitz said that has yet to translate into Chinese buyers resuming business with the United States.
“It’s a buy-the-rumor, sell-the-fact type of deal,” he said. “Now we just need to get some buying, get some facts out here and some sales on the books instead of all the lip service so far.”
The Monday rally also doesn’t bring soybean prices back to the $10 per bushel mark, which is generally accepted as the break-even point for the crop.
Kirk Leeds, chief executive officer of the Iowa Soybean Association, said any positive developments are helpful for farmers. But the lack of specifics on how much agricultural product China will buy makes it difficult for soybean prices to climb higher, he said.
That, combined with logistical issues in restarting shipments to China and the glut of soybeans already on the market, will lead farmers to reduce how much soybean acreage they plant next year.
“Nine dollars doesn’t pay the bills,” he said.
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