China proposes large U.S. ag purchases

Feb 22, 2019

U.S. farmers could see an extra US$30-billion worth of ag goods exported to China per year

By Diego Flammini
Staff Writer
Farms.com

American farmers could benefit from a Chinese proposal as part of a bilateral trade agreement.

China may offer to purchase an additional US$30-billion worth of U.S. ag products per year, Bloomberg reported. China imported US$19.6 billion of American ag products in 2017, the USDA said.

Following through on the proposal could bring U.S. ag exports to China to nearly US$50 billion annually.

The added ag purchases are part of several memorandums of understanding (MoUs) American and Chinese negotiators are working on. The MoUs include agriculture, technology transfer and intellectual property.

The publishing of a hard figure could mean a deal between China and the U.S. is possible because specific terms were never previously disclosed, said Moe Agostino, chief commodity strategist with Farms.com.

“The difference this time is that we’re hearing an amount,” he told Farms.com. “In the past, the cycle has been being close to a deal then the two countries go back to their respective trading desks. Progress is being made because we didn’t have that a month ago.”

If China and the U.S. reach an agreement, how it’s structured could affect grain markets, Agostino said.

“We need to know when it starts,” he said. “If it starts at the end of the year and it’s back-end loaded, markets are going to be very disappointed.”

The USDA is confident a deal with China will help increase grain prices.

“If we reach an agreement on structural reforms, we can recover markets very, very quickly,” U.S. ag secretary Sonny Perdue told reporters at the USDA’s outlook forum yesterday.

But, at this point, it’s “premature” to comment on what China may or may not do, he said.

Video: Will the 2025 USDA December Crop Report Be a Market Mover/Surprise?

Historically, the USDA December crop report is a non-event or another dud report as the USDA reserves any final supply changes to the final report in January of the following year in this case 2026. But after the longest U.S. government shutdown in history at 43 days and no October crop report will they provide more data/surprise and make an exception?
Our China U.S. soybean purchase tracker is now at 26.6% or a total of 3.2 mmt but for traders it’s taking too long to unfold.
The final Stats Canada production report was bearish canola and wheat projection a record crop in both (it adds to the global glut of supplies) and bullish local corn and soybean prices in Ontario/Quebec thanks to a drought. It will not help the fund flow short-term, the USDA may need to offset it?
A U.S. Fed interest rate cut of another 25-basis point next Wednesday (probability 87.1%) could help fund flow and sentiment in stock and ag commodities into year end.
More inflows into Bitcoin this past week saw prices rebound back above 90,000 with support at 82,000 and resistance at 96,000.
A V-shaped bottom in cattle suggest the lows are in after Mexico reported another new world screwworm case. Lower weights, seasonal demand and higher U.S. beef select/choice values with a continued closure of the Mexican border to cattle will result in a resumption of higher cattle futures into yearend.
Australia is expected to produce its 3rd largest wheat crop ever at 36 mmt adding to the global glut of supplies.
Reports of ASF in hogs in Spain the largest pork exporter in Europe could see the U.S. win more pork export business long-term.
If the rains verify into next week of 3-5 inches for Brazil it would go a long way to fixing the dry regions from the last 2-months, but the European weather model has been wrong for the past 2-months!
Natural gas futures are surging to the 3rd price count as frigid hold temps set in.
CDN $ is also surging to end the week on a very resilient economy and better employment numbers suggesting no interest rate cuts next week.
Finally, the CFTC report showed funds were net buyers of soybeans but sellers of corn, canola and wheat. In real time the funds have gone back to selling as they take some profits.