Soybean futures moved narrowly between minor advances and declines as investors assessed a Chinese government statement about reducing tariffs on U.S. agricultural goods, a step that might open the door for purchases by the Asian nation. On Thursday, China's Ministry of Commerce announced that the two parties had reached a broad consensus on lowering tariffs after their latest negotiations. The statement was made after a Wednesday telephone discussion between China's Foreign Minister Wang Yi and America's top diplomat, Marco Rubio. This tariff reduction could make U.S. soybeans cheaper than Brazilian alternatives.
Hightower Report analyst Randy Place stated, "If China drops their 10% tariff on US goods, it would certainly make the US much more competitive with South America."
However, Beijing's announcement was vague, and the country has not yet fulfilled the $17 billion agricultural import promise that the White House mentioned in May. This figure is extra to a previous pledge reported by the U.S. for yearly purchases of 25 million metric tons of American soybeans.
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Iowa-based brokerage US Commodities president Don Roose commented, "It's one of those 'sellers beware but proof is in the real action.' The trade is looking for real purchases."
Corn gained up to 0.9% and wheat up to 1.3% before the gains faded. According to Place, reducing the tariff might generate purchasing chances for private soybean processors, not only the state-owned firms that handled much of the buying after the initial thaw in US-China relations late last year.
Place continued, "It would be a significant bullish event if they do announce a tariff reduction, especially for beans, but corn and wheat are likely to follow as well."
On Thursday, the USDA reported that weekly U.S. soybean export sales stood at 224,300 tons, of which 65,400 tons went to China. The average estimate from Bloomberg-polled analysts was 775,000 tons for global sales. Market participants are weighing the possible increase in Chinese purchases against planting data from earlier this week, which indicated more soybean acres and fewer corn acres. U.S. markets will be shut on Friday in observance of the Independence Day holiday.
The soybean market is highly sensitive to US-China trade relations, as China is the world's largest importer of soybeans. A tariff reduction would improve the competitiveness of American beans against Brazilian supplies, which have gained market share during the trade dispute. The White House had earlier secured pledges for billions in agricultural purchases, but actual buying has lagged, leaving traders cautious.
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