Fresh figures from The Agriculture Department, published Friday, have cast significant doubt on China's commitment to purchasing millions of bushels of American soybeans, a deal the Trump administration had heavily promoted last month following a crucial summit between President Donald Trump and Chinese leader Xi Jinping.
TL;DR
- China has purchased only 332,000 tons of U.S. soybeans, far below the 12 million tons agreed upon.
- Tariffs make U.S. soybeans more expensive than those from Brazil, reducing China's incentive to buy.
- Farmers face financial hardship due to low sales, rising expenses, and potential bankruptcy.
- The Trump administration's promised aid package for farmers is unclear amid current circumstances.
The USDA report released after the government reopened showed only two Chinese purchases of American soybeans since the summit in South Korea that totaled 332,000 metric tons. That’s well short of the 12 million metric tons that Agriculture Secretary Brooke Rollins said China agreed to purchase by January and nowhere near the 25 million metric tons she said they would buy in each of the next three years.
American farmers were hopeful that their biggest customer would resume buying their crops. But CoBank’s Tanner Ehmke, who is its lead economist for grains and oilseed, said there isn’t much incentive for China to buy from America right now because they have plenty of soybeans on hand that they have bought from Brazil and other South American countries this year, and the remaining tariffs ensure that U.S. Soybeans remain more expensive than Brazilian beans.
“We are still not even close to what has been advertised from the U.S. In terms of what the agreement would have been,” Ehmke said.
Beijing has yet to confirm any detailed soybean purchase agreement but only that the two sides have reached “consensus” on expanding trade in farm products. Ehmke said that even if China did promise to buy American soybeans it may have only agreed to buy them if the price was attractive.
His team conferred with Chinese officials today, Trump stated, and they guaranteed the White House that increased soybean purchases would occur, though he provided no specifics on quantity.
“They’re in the process of doing not only a little bit but they’ll be doing a lot of soybean purchases,” he told reporters.
Despite a 10-percentage-point decrease after the summit, the Chinese tariff on American beans continues to be substantial, hovering around 24%.
Soybean prices fell sharply by 23 cents to $11.24 per bushel Friday. Ehmke said “that’s the market being shocked by the lack of Chinese demand that was confirmed in USDA data today.” Prices are still higher than they were before the agreement when they were selling for $10.60 per bushel, but the price may continue to drop unless there are significant new purchases.
Before the trade agreement, Trump had promised farmers would receive an aid package to help them survive the trade war with China. That was put on hold during the shutdown, and now it’s not clear whether the administration will offer farmers aid like Trump did in his first administration.
American farmers recall facing similar circumstances following Trump's initial trade dispute with China. The trade agreement China entered into with The United States in 2020 stipulated substantial acquisitions of American agricultural products. However, the onset of the COVID-19 pandemic interfered with commerce between the two countries precisely when the pact was implemented. While U.S. Agricultural exports to China reached an unprecedented level in 2022, they subsequently declined.
Even without China's typical purchases, which account for about a quarter of the U.S. Harvest, soybean prices are currently a bit above last year's levels. This is due to a slightly smaller soybean harvest this year, coupled with robust domestic demand driven by ongoing expansion in biodiesel output.
This year, farmers are grappling with escalating expenses for fertilizer, seed, equipment, and labor, which is negatively impacting their earnings. Caleb Ragland, a Kentucky farmer and president of the American Soybean Association, has expressed concern that numerous farmers might face bankruptcy this year if substantial purchases from China or government assistance aren't forthcoming.
Ragland expressed continued optimism regarding China's commitment to the purchases, though he acknowledged that current low sales figures make it difficult to maintain strong confidence.
“We don’t want to assume they won’t. But it’s going to be a wonderful day when we actually deliver those soybeans, and when there’s my money in hand and so forth and the transaction’s complete,” Ragland said.
China is the world’s largest buyer of soybeans. China bought more than $12.5 billion worth of the nearly $24.5 billion worth of U.S. Soybeans that were exported last year.
This year, China ceased purchasing American soybeans following Trump's imposition of tariffs, redirecting a larger portion of their acquisitions to South America. According to World Bank data, even prior to the trade dispute, Brazilian beans represented over 70% of China's imports in the preceding year, with the U.S. Share declining to 21%.
According to Ragland, every vendor he's spoken with has indicated they'll be raising their prices for the upcoming year, a move that will persist in pressuring farmers.
“We’re still looking at sharp losses and the red ink as we figure budgets for 26 is still very much in play,” he said.