CHICAGO (Reuters) - China will probably resume buying American soybeans around Jan. 1 because of limited supplies in Brazil after slashing imports from the United States due to the U.S.-China trade war, U.S. Agriculture Secretary Sonny Perdue said on Monday.
It has “yet to be determined” whether China will remove tariffs on imports of American soybeans as part of a truce agreed between U.S. President Donald Trump and Chinese President Xi Jinping in Argentina on Saturday, Perdue said.
His projection that the world’s top soy importer would restart deals with the United States offers hope to U.S. farmers who have suffered as the dispute between the top two economies has hurt crop prices.
China bought about 60 percent of U.S. soybean exports last year in deals worth $12 billion, but has mostly been buying from Brazil since imposing its 25 percent tariff on American soybeans in July in retaliation for U.S. tariffs on Chinese goods.
“We don’t think there’s enough soybean supply in South America to tide them over to the new crop (in) South America,” Perdue told reporters at an agricultural conference. Latin American crops will be ready to harvest in early 2019.
China and the United States agreed in Buenos Aires to refrain from setting additional tariffs that would escalate the row that has crippled U.S agricultural exports.
The United States said Beijing also promised to buy an unspecified but “very substantial” amount of farm, energy, industrial and other products, with purchases of agricultural goods to start “immediately.”
Perdue did not have details about the size and timing of deals, but said he expects China’s first agricultural purchases to be soybeans.
U.S. soy exports to China are down about 45 percent this year through the end of September, according to USDA data.
“We think they’re going to have to come back into the United States market and we’re hopeful this announcement in Argentina will facilitate that more quickly,” Perdue said.
China also could buy U.S. rice, poultry, grain sorghum and wheat, Perdue said.
Chinese traders said Beijing will need to drop the tariffs it imposed on American farm products before it can make significant purchases, however.
Perdue said he did not yet know whether that would happen for soy.
“I’ve been talking with our negotiators and those are the issues that are going to be fleshed out here in the next few days,” Perdue said.
U.S. soybean futures rose to their highest level since August on Monday but later pared gains due to uncertainty about the size of any new deals.
If China does not drop or cut the tariffs, the only Chinese buyers for U.S. soybeans would be government-backed firms such as state grains stockpiler Sinograin, while private firms would continue to buy from Brazil, said Dan Basse, president of Chicago-based consultancy AgResource Co.
“There is no evidence of Sinograin coming in here and being a buyer at this point,” Basse said.
The USDA is moving ahead with plans for a second round of financial aid to farmers hurt by trade wars, Perdue said. Details could be announced by the end of the week, he said.
Reporting by Tom Polansek in Chicago, additional reporting by Julie Ingwersen in Chicago.; Editing by Franklin Paul, Matthew Lewis and Sonya Hepinstall