Soy exports from the United States to China soared to the highest for the first time in almost two years in a fresh sign that tensions between the world's two largest economies could finally agree.
China's import of soybeans from the U.S. reached 2.6 million tons. The Asian powerhouse had not bought that large amount since March 2018. The amount was a remarkable jump from 1.1 million tons that China imported in October. Last year, the Asian powerhouse did not purchase any and instead channel its orders from Brazil.
Also, last year, American soybean farmers suffered grave oversupply as all markets they export to veered away from ordering to avoid the high tariffs imposed at the time. Last year, the markets saw the worse of trade relations between the world's two largest economies.
The good news came as US President Donald Trump and Chinese President Xi Jinping through their respective trade negotiators agreed on a phase one trade deal to be signed in January. Details of the deal were not out yet entirely but one of the agreements is that China will increase its purchase of American farm products. At the same time, the Trump administration canceled supposed tariffs that would have implemented last Dec. 15.
With that, market observers expect that Chinese companies will buy American soybeans moving forward, most especially that China had already waived as much as 30% on tariffs. Data from the U.S. Department of Agriculture said that China is expected to buy 10.5 million tons of soy from the U.S.
China's renewed buying of US soy does not only bring good results to the American soy industry, but it also brought a rebalance to the global soybeans market. According to the US agriculture department, the global soybean output is expected to fall by 21.65 million tons.
The global market was only expected to turn in 336.56 million tons to be exact. However, with China's renewed commitment to buying more soybeans, the Asian powerhouse can fuel up to 3% year on year increase, or about 85 million tons more per year. Another good news is that China is already in the process of recovering from the African Swine Fever. This means that once pig growers in the country increased the number of their pigs again, the country will buy more soybeans continuously.
China remains to be the world's biggest soybean importer because of its massive pork industry. The Asian powerhouse accounts for as much as 64% of global soy purchases. Almost all of the country's imported soy is made into animal feeds.
