That limited trade agreement the U.S. and China reached Friday was met with enough optimism to move the markets late in Friday trade, but it became more of a wait and see affair as the new week started with all interested parties wanting to see the details once available.
Still, there’s optimism there will really be something concrete here, according to Bill Gentry with Risk Management Commodities of Lafayette.
“It sounds like an 80 percent done and run type of situation where if it’s not perfect they’re still going to hash it out and get something signed,” Gentry told HAT. “Going forward I think that would be price positive. They’re working on commodity allocations right now and I think the bean market was hoping we would get more numbers, so to speak, and that’s maybe something they’re going to try to hammer out before this first deadline. But beans first, I’d like to think that corn is going to get some help, and I also think wheat could be a good follower if corn could wake up and do something constructive.”
Gentry adds this deal is closer to getting done than what we’ve seen so far, and the pork industry should see benefit too.
“We’ve already exported quite a bit the last couple of weeks,” he said. “We had good cash markets last week. The only thing I keep reminding is the top five exporters of pork cannot match much of what China has lost. They’ve lost 45 percent of their hog crop and we can’t even come close to dinging that. So, they could buy up all of ours and still need more. The question is when and how.”
So, obviously demand is high, and he says China will have to come to the U.S. for large supplies to meet that demand.
The Chinese Vice Premier doesn’t have the full authority to approve the agreement. China’s President Xi Jingping must agree to the deal as well. Monday the U.S. Treasury Secretary Steven Mnuchin noted that this a substantial phase one of a trade agreement with a lot of work already finished. China hasn’t said much through their state media, but it acknowledges there has been important progress.
Dave Salmonsen, American Farm Bureau Federation Senior Congressional Relations Director, says a couple of years ago “we were selling over $20 billion of U.S. ag products to China, and this year we’re expected to sell about $7 billion.”
He said agriculture really wants both sides to “get to the point we can start unwinding these tariffs that have put such burdens on our exports to China, and burdens on their exports to the U.S.”