Home Indiana Agriculture News Plenty of Incentive on Both Sides Now For US-China Trade Deal

Plenty of Incentive on Both Sides Now For US-China Trade Deal

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As last week came to a close, reports swirled that China was lifting some retaliatory tariffs on us pork and soybeans. The rhetoric was enough to provide a nice boost to the soybean and pork markets, Arlan Suderman told HAT Friday that China had put a waiver on those commodities along with other products going from the United States to China. He also said it was a shrewd political move by China.

“As you do the math, South America is starting to run out of soybeans and we’ll run out before China has been able to ship all the soybeans they need ahead of the next Brazilian harvest,” the chief commodities economist with INTL FC Stone said. “So, they were going to need to buy some more soybeans from us. We also know that their pork supplies are running extremely tight, that we’re seeing rationing on the ground in China, and that prices are exploding higher. Food inflation last month was ten percent because of 47 percent increase in pork prices, so they need U.S. pork.”

Suderman said it looks like they’re making the purchases as leverage in the trade talks. He added USDA had confirmed 8 million bushels of U.S. soybeans sold to China recently, less than rumors of 22 million bushels and nowhere near the 180 million bushels that news reports claim will be sold. It is also far short of what China was normally purchasing several years ago.”

With most every rumor of progress in the trade war, optimism grew and often the futures market responded favorably. However, in recent weeks, traders have become more cautious to a reaction, or over-reaction from such reports. This time, Suderman agrees, the feel is a little different.

“Now it looks like both sides are suddenly warming things up, making good will gestures to one another and really rebuilding that atmosphere in which they can negotiate. Both sides have an incentive to get a trade deal done.”

Suderman is not mistaking this for long term common ground between the two countries, “but both sides have an incentive to try to reach a deal and to remove this from their plate. That does give us a window of opportunity over the next month to potentially see a deal.”

The incentives to come to a deal are now more pressing too. For President Trump there is an economy that is still growing but, according to Suderman, at risk of slipping into recession as consumers may be starting to believe the headlines that it could be a threat.

The incentives for China include the soaring domestic food prices because of African Swine Fever, an economy that is struggling much more than the Chinese official data suggests, and pro-democracy protests in Hong Kong. Suderman says securing a trade agreement would allow China to focus on its other issues so President Xi can maintain his support within the Communist party leadership.