China Pauses Ag Purchases as Tensions Escalate

Conflicting signals emerged Monday in the trade relationship between the U.S. and China.

Some news outlets reported that the Chinese government had told major state-run agricultural companies to pause purchases of some American farm goods, including soybeans, after tensions escalated between the world’s two biggest economies over the weekend.

Those same news outlets later in the day reported that China bought at least three cargo loads of U.S. soybeans on Monday.

Even in those reports, China promised “firm countermeasures” in response to what it characterized as U.S. attempts to harm Chinese interests.

President Donald Trump said on Friday he was directing his administration to begin the process of eliminating special treatment for Hong Kong, ranging from extradition treatment to export controls, in response to China’s plans to impose new security legislation in the territory.

In response to that, initial reports from unnamed Chinese government officials were that the country would pause state purchases of large-volume U.S. corn and cotton. Those reports also said Chinese buyers had cancelled an unspecified number of pork orders from the U.S.

As the dust settles on events of the past few days, the agriculture industry is left to wonder what it might mean for the phase one trade deal.

As part of the deal, which was signed in January, China pledged to buy an additional $32 billion worth of U.S. agriculture products over two years above a baseline based on 2017 figures.

China has bought U.S. soybeans, corn, wheat and soy oil this year to fulfill its commitment under the trade deal. Beijing has also stepped up purchases of U.S. pork, after the deadly African swine fever decimated its pig herd.

The uncertainty has filtered through to the commodities markets, with China opting to buy Brazilian soy instead of American beans.

Sources: Reuters, Bloomberg