United States farmers, facing a challenging year of lower prices and stalled exports, are running low on time to receive relief in the form of a deal between President Donald Trump and Chinese leader Xi Jinping that has China resume purchases of U.S. soybeans.
Soybean prices rose on Monday in anticipation that a deal could be on the horizon. The two world leaders are set to meet soon, and the hopes of farmers were lifted after Trump mentioned his desire to ink a deal involving soybeans. China has been a massive importer of U.S. soybeans in years past, but purchases have now ground to zero as Beijing works to exert leverage against Washington.
“It would certainly help,” Scott Irwin, an agriculture economist at the University of Illinois, told the Washington Examiner. “I mean, you can already see that the markets today are bouncing up around a dime today on reassessing the prospects of some kind of trade deal.”
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More than anything, Irwin said, U.S. farmers want to return to the status quo, to China purchasing soybean crops as it was before the recent escalation in the trade dispute.
“To give you an idea of the magnitudes that are involved here, last year, the U.S. exported about 1.9 billion bushels of soybeans,” he said. “And this year, the latest estimates that were updated last September, the [U.S. Department of Agriculture, or USDA] estimated we would export a little under 1.7 billion, and that decline is pretty much entirely due to the trade problems with China.”
Trump’s expansive use of tariffs has raised fears for many businesses. And China’s move to stop buying U.S. soybeans in particular has depressed prices for farmers.
“China’s not taking it, so as a result the market is flooded,” said James Mohs, associate professor of accounting, finance, and marketing at the University of New Haven. “So what happens when you have an excess of goods? Prices go down.”
But time is of the essence for a trade deal involving soybeans.
Arlan Suderman, chief commodities economist at financial services company StoneX, told the Washington Examiner that the U.S. window for selling soybeans to China is typically from about September to January, given new crops of Brazilian soybeans start arriving at Chinese ports in February.
“So we have a relatively small window to sell to China, and that window is rapidly closing,” Suderman said.
Suderman said that based on information that his firm has collected, there are only about 10 million metric tons of soybean supply that China needs that hasn’t already been booked from South America, which is another global supplier of the crop for China. That equates to about 367 million bushels of soybeans.
For reference, China imported about 841 million bushels of soybeans from the U.S. last year.
“If President Trump were able to get an agreement for them to buy those soybeans from us, that 367 million bushels, then we could probably hit USDA’s current target of 1.685 billion for the current marketing year,” Suderman explained.
Accordingly, the timeline for the U.S. and China to come to an agreement over soybeans is a major concern, said Ryan Young, a senior economist at the Competitive Enterprise Institute.
“The harvest has come and gone already, and they can store crops, but only for so long,” Young told the Washington Examiner
It is worth noting that this is not the first time that soybeans have been in the spotlight amid tensions with China.
Trump made a trade deal with China involving soybeans in his first term, called the phase-one trade deal. The agreement entailed China buying $200 billion more of U.S. goods and services in 2020 and 2021. The deal, though, went unrealized after the pandemic hit.
Young described the phase-one deal as “doomed from the start,” but the pandemic also put an “exclamation point” on its failure.
While it is fairly easy for China to ban U.S. imports, as it has done in the case of soybeans, it is also fairly difficult for China to make specific guarantees about how much of a product it can commit to buy, according to Young.
That is because while the Chinese government can buy certain things, it is more challenging for Beijing to ensure that private companies in the Chinese food industry buy up amounts that satisfy those commitments.
“So even if they do a phase-one deal style guarantee now, like they tried to do back then, it wouldn’t necessarily work,” Young said. “They can’t necessarily control where a private company buys their soybeans from — the U.S., or from Russia, from Brazil.”
Additionally, China has been investing in Brazilian infrastructure for the past couple of decades and working to shift away from U.S. supply of soybeans, Suderman said.
And against the backdrop of all of this, the White House is also eyeing a bailout for farmers who have suffered losses from the fallout of Trump’s trade war. National Economic Council director Kevin Hassett last week indicated that the Trump administration is planning a payout to farmers, although he didn’t reveal specific details about the plan.
The government has been shut down for over two weeks now, which Hassett said is complicating the situation for the White House. He also hinted that farmers would have to wait until the end of the shutdown to find out what the bailout might entail.
“I expect that when the government opens that very soon after you’re going to see what President Trump’s plan for farmers is, but it’s really quite clever and generous. I can say that,” Hassett said during an event hosted by Axios.
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Irwin also discussed the hopes of the farming industry for some sort of bailout or assistance from the federal government.
“Well, crop returns are definitely very low,” Irwin said. “And without this kind of government assistance, you would definitely have large financial losses.”
