China has bought US soybeans for the first time since the trade war between the two countries started in July – a move hailed as a “great step” by US officials.
One of the biggest casualties of the US-China trade war has been the US soybean sector.
China is by far the world’s biggest importer of soybeans.
And Beijing’s high tariffs placed on US soybeans this year has been severely hurting US farmers.
A trade truce between China and the US was reached earlier this month however, and there had been much anticipation that China would soon return to the US soybean market.
But while China’s purchase of 1.13 million tonnes of US soybeans on Thursday was meet with much applause from some, others said the purchase was too small, and not a sign that the trade war was cooling.
“Having a million, million-and-a-half tonnes is great, it’s wonderful, it’s a great step,” said Steve Censky deputy secretary of the US Department of Agriculture.
“But there needs to be a lot more as well, especially if you consider it in a normal, typical year, we’ll be selling 30 to 35 million metric tonnes to China.”
The sale also failed to excite traders, who said the numbers fell short of estimates, which saw a sell-off in soybean futures.
“It’s a start, but it’s not nearly enough to fix our problems in regards to soybeans and a soybean oversupply in this country,” said Joe Vaclavik, president of Standard Grain, a Tennessee-based brokerage.
Why do soybeans matter?
In 2017, soybeans were the single biggest US agricultural export to China, which accounts for some 60% of the global trade in the commodity.
And soybeans are vitally important to China because they use the product to feed livestock.
The key supplier globally is Brazil, but China has also relied heavily on the US for soybeans supplies – in part due to seasonality.
Chief economist Robert Carnell from ING Bank told the BBC that China’s purchase on Thursday was more about convenience than anything else.
“The simple fact is China needs a lot of soybeans and it’s been buying them from Brazil, not the US,” he said.
“But Brazil could never supply all the soybeans China needed, so ultimately [China has] been driven back to US soybeans. And I think it’s just convenient for them to do that right now.”
Mr Carnell said that the recent arrest of Meng Wanzhou, Huawei’s chief financial officer and deputy chair, was far more indicative of where the trade war between the US and China was really up to.
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“[It’s] a battle for technology, a battle for 5G,” he said. “In particular, Huawei has become one of the world’s biggest suppliers of telecoms technology – and the US doesn’t really like that.
“[So that arrest] is giving you a much better, a much clearer message on where the trade war lines in the sand are really being drawn.”