Soybean farmers are cautiously optimistic as trade negotiations between the United States and China inch closer to an agreement that is expected to include big purchases of U.S. soybeans.
Exact details of the negotiations are unclear, but Treasury Secretary Scott Bessent struck an optimistic tone over the weekend and said he expects Chinese soybean purchases as part of the deal to be “substantial” and that soybean farmers would be pleased with the agreement.
Soybean futures have shot up in response to the news, up nearly 3% over the past few days, the highest they have been in over a year. Farmers are hoping for a lucrative deal given that 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.
“Obviously, the markets reflect a cautious optimism and an excitement that maybe we are making some progress for the first time in quite some time,” Arlan Suderman, chief commodities economist at financial services company StoneX, told the Washington Examiner.
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President Donald 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.
Still, Suderman also said that there is a “healthy dose of skepticism” among farmers about the deal.
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.
“If you look at the phase one-trade agreement during Trump 1.0, that China only bought about 58% of what they’d committed to buy over a two-year period,” Suderman said. “So while we’re encouraged, while things are looking upbeat, positive, there’s also some sense of caution as well on what will they actually do.”
Allen Featherstone, head of the Agricultural Economics department at Kansas State University, said that if the administration can reopen the Chinese market for U.S. soybeans, it would be a “big deal.” He noted that in recent years, China has purchased between $12 billion and $17 billion worth of soybeans from U.S. farmers, but this year, that completely ground to a halt.
“It certainly has depressed prices, and that’s negatively affected income,” he told the Washington Examiner. “And soybeans are China’s biggest import from the U.S., and so it certainly has caused soybean farmers to scramble for alternative markets, but being able to have China back in the buying mode will increase price.”
And some might be surprised by just how big of a crop soybeans are in the U.S.
From an acreage perspective, soybean production in the U.S. is second only to corn, according to Featherstone. It is also an extremely large market in terms of exports, with 40% to 50% being exported to other countries such as China.
There is also a time component to any possible deal. China has already purchased soybeans from South America, and how quickly U.S. farmers can secure Chinese purchases of their soybeans is a major concern.
“The harvest has come and gone already, and they can store crops, but only for so long,” said Ryan Young, a senior economist at the Competitive Enterprise Institute.
Bessent said this weekend that as a part of negotiations, the U.S. has taken Trump’s threat of additional 100% tariffs “effectively off the table” and that Chinese threats to impose worldwide export controls on rare earths have also been nixed.
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Trump and Chinese President Xi Jinping are planning to meet later this week in South Korea to hash out further details of a deal.
And even with the possible Chinese soybean deal, the administration 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 recently indicated that the Trump administration is planning a payout to farmers, although he didn’t reveal specific details about the plan.
