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Progress in China Trade Talks, but it Won’t Fix U.S. Soy Balance Sheet



The U.S. and China are at the table in Beijing talking trade and signs a deal could be reached have come from China the last two days. One of those signs is adding a third day of talks Wednesday. INTL FC Stone chief commodities economist Arlan Suderman says the additional day of negotiating suggests positive developments, but he cautions any trade deal reached will not fix the current U.S. soybean balance sheet.

“It’s not going to fix it at all,” he said. “There are simply too many soybeans in the world. Obviously, we’ll take any business we can get, that is very important, that we have access to China once again. But, what does that mean when both South America and North America are over-producing soybeans? It means that they have to fight to get China’s business and that means a race to the bottom perhaps, pricewise, until we get a price that absorbs that demand and discourages production.”

He says another sign of progress in the talks is the report from Reuters Tuesday that China has approved five genetically modified crops for import.

“That’s seen as positive,” he told HAT. “It’s seen as a step forward, but there are still some (GM crops) that they have not yet approved, so they didn’t go all the way. It’s a good faith type of a gesture, but they still have not gone all the way to move forward the approvals of everything. We just don’t want to run into a situation where they can say ‘oh we’ve got a cargo of corn and it had some seeds in it from an unapproved hybrid.’ We’ve been down that road before and don’t want to see it happen again. But it is a good faith gesture and suggests that progress is being made in the talks.”

Suderman added FC Stone’s boots on the ground report China has interest in purchasing 8-12 million metric tons of corn and there are continued rumors they’ll purchase up to 6 million metric tons of wheat. But, due to African swine fever risks, hog feeding in China is felt to be down 15 percent, resulting in a downturn in soy meal and corn demand.