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Chinese Soybean Buying Pause is Not Welcome News

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Reports Monday said China was responding to President Trump’s sanctions on China announced last Friday by putting a pause on large purchases of U.S. soybeans and pork.

“If that is true, that’s not good news of course,” says John Zanker with Risk Management Commodities. He says farmers need Chinese purchases of soybeans now and throughout the year after exports fell off with the trade war.

“We need the Chinese buying old crop beans just to get to what the USDA is currently projecting, and we definitely need them to be huge buyers next fall if we stand any chance at all of meeting next year’s projections,” he told HAT. “So, they’re doing some things that would suggest that there’s going to be some political pushback. If that’s the case, that’s not good for soybean prices.”

How long can China afford to do without soybeans from the United States? Zanker says they don’t need us short term.

“They would be fine if they didn’t buy one more U.S. soybean between now and say September. They have purchased and shipped a huge amount of Brazilian soybeans. Argentina still has a lot of exportable soybeans and meal, so we’re not in a very good position here.”

If the current situation continues into the fall there will be negative ramifications even though the Chinese will have to purchase soybeans from us.

“I don’t think there’s any doubt about that, but they won’t be purchasing them at a pace that’s needed to meet the USDA’s current projection.”

Recent Brazilian soybean purchases for September and October shipment further indicate the Chinese are willing to put the Phase 1 trade deal with the U.S. at risk. This is just another of a handful of incidents impacting U.S. farm prices the last several years, the type of incidents Zanker says we haven’t seen individually for decades.

“And now we have three major things going on, one of them for the last two years the trade war, and of course the coronavirus, and swine fever, which wiped out about 20 percent of the world’s hog population. So, we’ve been hit with so many things here that it’s almost amazing I’m sitting here looking at $8.52 on soybeans right now.”

Amazingly front month soybean futures prices Monday were only down a fraction and the November contract finished a half cent higher.