A trade meeting between China and the U.S. will come at the end January, as marketers look for any tariff relief they can find.
However, as with all negotiations, nobody is quite sure how things will play out.
“I don’t think anybody knows exactly what’s going to happen,” Joe Vaclavik of Standard Grain said. “Given what we’ve seen so far during this trade truce, there’s going to be some reason to be pessimistic still. We’ve seen a lot of talk and maybe the talk is going the right direction.”
Vaclavik noted that soybeans weren’t at the front of the trade war. The major issues have been intellectual property and technology. He called soybeans “simply collateral damage in what’s a much larger issue. It’s unfortunate for the farmer that the bean market was hurt.”
China simply dropping its tariffs on U.S. soybeans may not put the market back where farmers want it to be, he said. China’s buying focus tends to favor South American soybeans this time of year, and with another good crop projected for many areas of Brazil and Argentina, the U.S. could be left out in the cold.
“Is China going to come back and contra-seasonally make a whole bunch of U.S. purchases?” Vaclavik asked. “I suppose that’s possible, but I don’t know if that is the most likely scenario.”
On Jan. 16, CONAB dropped its estimated crop production for Brazil to 118.8 million tons, below last year’s record crop of 119.4 million tons. While a drop in production is good news for U.S. marketers, it may not make a huge difference.
“There is some strong evidence to suggest that China’s demand for soybeans in general is being reduced,” Vaclavik said.
“China said that soybean imports are going to be down 9 million, so if China soybean imports drop more than Brazilian production drops, you’ll still have a situation where you can find supply available. The damage would have to be much worse than advertised right now for us to see a major pop in the market.”
With the meetings between U.S. and Chinese trade representatives set for Jan. 30-31, Vaclavik said something will need to be done soon. However, he noted it will be an “uphill battle.”