Soybean farmers impacted by the ongoing trade spat between the U.S. and China could see some needed good news at the onset of the new year. Good news for farmers could also translate to good news for farm equipment manufacturers and dealers.
U.S. Agriculture Secretary Sonny Perdue told a group of reporters on Monday that China will probably again start buying American soybeans around Jan. 1. Perdue said this is due to limited supplies in Brazil, which saw an influx of demand from China after the country enacted a 25% tariff on American soybeans in retaliation of tariffs coming from the U.S.
Perdue’s comments closely follow an announced truce between the U.S. and China. The two countries are to initiate trade talks soon. In a tweet Monday, Trump said U.S. farmers will be “a very BIG and FAST beneficiary of our deal with China. They intend to start purchasing agricultural products immediately.”
Perdue told reporters it is “yet to be determined” whether China will ultimately remove the tariffs on soybeans and other commodities as part of the truce.
Reuters reports that China bought about 60% of U.S. soybean exports last year in deals worth $12 billion. But since the tariff was enacted earlier this year that demand has largely shifted to Brazil. U.S. soy exports to China are down about 45% this year through the end of September.
"We don't think there's enough soybean supply in South America to tide them over to the new crop in South America," Perdue told reporters at an ag conference.
According to a Bloomberg Intelligence report, the potential recovery of soybean prices “should be a primary pillar for the agriculture sector, on the back of the Brazilian real.”
“Despite a near-perfect storm for lower prices in 2018, soybeans have been relatively resilient in the face of U.S.-China trade tensions, the plunge in the real and record Corn Belt production.”