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Market upbeat about China-US soybean deal, but time needed to sort out details

2018/12/5 10:23:04   source:Global Times

US exporters and analysts have expressed optimism about potential deals between China and the US over the purchase of US agricultural products, including soybeans, which have been hit by tariffs amid the trade war, but it's unclear how long it will take to sort out the details.

Chicago soybeans futures jumped on Monday to their highest in almost six months, rising 1.9 percent, after a trade truce reached by the Chinese and US leaders on Saturday at a dinner meeting.

The two sides agreed not to impose new additional tariffs and the White House said in a statement that, as part of the truce deal, China has agreed to start purchasing agricultural products from US farmers immediately.

"Since the Saturday consensus itself does not lift the additional 25 percent tariff on US soybeans, the rise of futures only reflects the market's optimism instead of real progress on trade," Jiao Shanwei, editor-in-chief of grain portal cngrain.com, told the Global Times on Monday.

Tian Yun, vice president of the Beijing Economic Operation Association, told the Global Times on Monday that the industry will remain uncertain until detailed agreements on tariffs are made.

As part of the truce deal, officials from the two countries will hold talks over the next several months, which "are likely to yield some results," Tian said.

Bilateral soybean trade is likely to rebound after the talks, "probably at higher prices," Tian said.

The December negotiations will determine how much each side is willing to compromise and the truce showed that Trump "reconsidered the trade war he initiated," Tian said.

Trump's Republican Party recorded losses in the mid-term elections for the House of Representatives in some agricultural states that supported him in the 2016 presidential election. That may have contributed to the truce deal because the trade war indeed harmed US farmers and enterprises rather than supporting Trump's efforts to alleviate trade deficits, Tian noted.

Zhang Xiaoping, China director for the US Soybean Export Council, told the Global Times on Monday that the sooner the additional tariffs are lifted, the quicker new soybean deals will be signed.

"The truce... encourages us to sell in China and other global markets. We will keep promoting fair, free and mutually beneficial soybean trade," Zhang said.

China has been the biggest importer of US soybeans, with trade of $12.3 billion last year, according to the US Department of Agriculture.

"China has been diversifying its soybean import sources since 2012, eyeing South Africa and Argentina as ideal substitutes for the US," Jiao added.

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