China-US trade doubts drag grain markets back into the fog
No sooner had the USDA cleared a way for grains, in issuing its first 2026/27 supply and demand forecasts, than China-US doubts have shrouded markets in uncertainty again.
China agreed, at last week’s meeting between presidents Trump and Xi, to buy $17bn in US ags annually, in 2026, 2027 and 2028, on top of the 25Mt of soybean purchases a year it has, apparently, already pledged.
At least, so the White House says.
China, though, is proving more circumspect.
Beijing on Thursday said that the two countries “should create favourable conditions for two-way agricultural trade, and promote the recovery and continued expansion of agricultural trade co-operation”.
However, it failed to clarify what that might mean financially.
That the US and China have “agreed in principle to bring relevant products under the framework of reciprocal tariff reduction, and set guiding targets for expanding two-way trade in agricultural products” was as far as China went.
The gap between White House and Chinese statements has created a breeding ground for market speculation.
CRM Agri highlights key factors to consider in navigating the uncertainty.
1) For China to import $17bn of US ags, excluding soybeans, in a year is rare, but not unknown. In 2021, the total reached $18.7bn, and in 2022 $20.1bn, according to USDA data, although the 10-year average is far less, at $10.9bn.
It looks ambitious to bank on $51bn in imports over three years by China, which fell short in purchases in the Phase 1 deal agreed in Mr Trump’s first term in office.
2) Corn looks a promising target for Chinese imports. The US has corn to sell, reflected in export prices which are reasonably competitive with eg those of Brazil. China bought more than $5.0bn of US corn in both 2021 and 2022.
Chinese corn stocks will end 2025/26 at an 11-year low, on USDA forecasts, although the accuracy of such estimates must be questioned.
3) Wheat looks a less likely target. Weak prospects for this year’s US harvest mean reduced export supplies, as being reflected in sizeable premiums over other origins. That will likely matter for a price-conscious buyer such as China.
4) For soybeans, last week’s meeting failed to prompt the substantial Chinese order of US soybeans that the market had expected.
However, neither has it dashed hopes that purchases might be in the offing. Chicago soybean futures have slipped back into the $11.60-12.00/Bu trading range they have ploughed for most of the past two months.
5) Two grains which China is keen to buy, the USDA says, are barley and sorghum, which are not subject to tariff-rate quotas. That said, the US is only a major exporter of one of these, sorghum.
Signs of China altering its TRQ regime might herald the an adjustment in its grain import balance.
Trusted analysis, forecasts and advice
CRM Agri delivers totally independent market analysis, market leading and award-winning forecasts to support your decisions making and strategic risk management advice to give you an edge in volatile markets.
Get in touch for a trial.
