Soybeans in Chicago led an advance in U.S. agriculture futures after the White House said China had agreed to immediately restart purchasing American farm products as part of a trade truce between the two countries.
The soybean contract for January delivery jumped as much as 3.2 percent to $9.23 3/4 a bushel, the highest since June, while corn and wheat also climbed. Meanwhile, futures in China dropped on expectations of increased supply, with soybean meal on the Dalian Commodity Exchange losing 3.4 percent to 2,953 yuan a metric ton, the lowest since June.
“The price spike in Chicago soybeans and the fall in Dalian is a normal market reaction to the U.S.-China trade truce because China has agreed to start buying agricultural products from American farmers immediately,” said Monica Tu, an analyst at researcher Shanghai JC Intelligence Co. Still, “the market is very concerned about the outcome of further negotiations,” and whether there will be big purchases in the next few weeks, she said.
Risk appetite returned across most markets on Monday as President Donald Trump and his Chinese counterpart Xi Jinping agreed to pause the introduction of new tariffs and intensify trade talks. The move is a significant turnaround in relations between the U.S. and one of its biggest customers for farm products.
“China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial and other product from the United States to reduce the trade imbalance between our two countries,” according to the White House statement.
Sustained gains in prices will depend on how quickly shipments of soybeans and other products resume given the higher prices they will command in China due to the tariffs. The fact that China made no mention of agriculture in its statement after the meeting may also increase trader concerns over whether these purchases will materialize.
As tit-for-tat trade tariffs ratcheted up between the nations this year, China slapped retaliatory duties on U.S. soybeans, pork and a host of other agricultural goods. Soybean futures tumbled as a result, and global agriculture trade flows were rerouted.