The China Trade Meeting: Why Soybeans Were Left Out
Optimism ran high ahead of last Thursday's meeting between President Donald Trump and Chinese President Xi Jinping.
For grain markets, the biggest question was:
“Would China come out of the meeting with a commitment to buy more U.S. agricultural products—especially soybeans? “
Going into the meeting, the market had already built in a fair amount of optimism. Soybeans had rallied on the expectation that a trade agreement could improve Chinese demand for U.S. grain.
After Thursday’s meeting, there wasn't much new information.
The U.S. and China announced plans to reduce tariffs on roughly $60 billion of goods, with each country identifying about $30 billion of products that could receive more favorable tariff treatment.
China’s agricultural list included products such as corn, wheat, sorghum, vegetable oils, soymeal, meat and dairy products.
But there was one very important product missing:
Soybeans.
The fact that soybeans were left off the tariff-reduction list was a major disappointment for the market. U.S. soybeans will continue to face an additional 10% Chinese tariff, according to the reports released overnight on Sunday.
That helps explain why soybeans led the grain markets lower to start the week.
So What Actually Happened Last Thursday?
The two countries agreed to extend their existing trade truce until January 10, 2027, giving both sides more time to negotiate a broader agreement.
The problem for grain traders is that the market was looking for more than an extension.
Traders wanted to see China commit to buying more U.S. agricultural products—and, most importantly, a clearer path toward increased U.S. soybean purchases.
That announcement never came.
Why Soybeans Are Taking the Hardest Hit
China remains the largest buyer in the global soybean market.
If China increases purchases of U.S. soybeans, it can quickly improve the U.S. export outlook and tighten the balance sheet.
If China continues sourcing a larger share of its needs from Brazil and other suppliers, however, the U.S. must compete harder for export demand.
Monday's announcement signaled that the soybean tariff issue still hasn't been resolved.
China has continued buying U.S. soybeans through state-owned companies, but private crushers are still subject to the additional tariff.
Reuters reported that Chinese state-owned companies Sinograin and COFCO have purchased more than 12 million metric tons of U.S. soybeans—nearly half of the 25 million metric ton annual commitment referenced by the White House.
So there is still Chinese demand for U.S. soybeans.
The market simply wanted to see evidence of even stronger demand.
What About Corn?
Corn was included on China's list of agricultural products eligible for more favorable tariff treatment.
That's a positive development for U.S. corn demand.
Even so, corn also traded lower Monday.
Why?
Soybeans often set the tone across the grain complex. When soybean prices fall sharply, corn and wheat frequently come under pressure as well.
Corn is also dealing with its own headwinds.
The U.S. harvest continues to advance, increasing physical grain supplies, while South American competition remains a factor.
So even though Monday's announcement was technically more favorable for corn than soybeans, the market still has plenty of supply-side concerns to work through.
The Biggest Takeaway
I think the biggest lesson from this week's trade headlines is that there is a difference between a trade agreement and actual demand.
The market rallied on the expectation that a Trump-Xi meeting could lead to more Chinese buying.
But so far, the details haven't provided the new soybean demand the market was hoping for.
That's why the selloff to start the week is bigger than just a reaction to one headline.
The market had priced in some optimism.
Now traders are taking some of that optimism back out.
What Has to Happen to Support the Rally?
The answer is fairly straightforward.
China needs to become a larger buyer of U.S. agricultural products—particularly soybeans.
Until those purchases begin showing up in the export books, traders may continue questioning how much of the China story reflects actual demand versus optimism surrounding ongoing negotiations.
Caylee Lair
Market Advisor, Midwest
With 7.5 years of experience in the grain elevator industry, Caylee has a strong foundation in grain merchandising and marketing. She is passionate about helping producers make confident, informed marketing decisions that support their long-term success.
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