Among the frustrations right now in selling commodities such as soybeans to China is that officials in the country are only allowing government-owned businesses to buy commodities, which is one of the main ways Chinese officials keep close restrictions on the market.
Lindsay Greiner, president of the Iowa Soybean Association, spoke to DTN on Thursday from Guangzhou, China, about some of the details about soybean buys that he and a team from the group have learned this week touring the country.
Chinese officials have agreed to buy close to 20 million metric tons (mmt) of U.S. soybeans this year, but Greiner said there’s a catch, because private buyers in China are still not allowed to buy U.S. soybeans. Only government-owned entities in China are allowed to make buys.
“It’s frustrating to some of the privately held companies, because they are being left out of the market,” Greiner said. “So there is a little bit of controversy going on over here because of interest in buying our beans.”
Private Chinese companies are still buying from Brazil, but the Chinese government has made it clear those buyers can’t turn to U.S. beans even if they were willing to pay the 25% import tariff, Greiner said.
According to USDA export sales data, China has imported nearly 4.7 mmt of U.S. soybeans and has another 6.5 mmt in outstanding sales for the marketing year. At this time last year, China had imported 25.8 mmt. In the 2017 marketing year, the U.S. shipped more than 31 mmt of soybeans to China.
The Iowa soybean delegation is touring parts of China as U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin start talks Thursday in Beijing with top Chinese officials looking to reach a trade deal that would end tariffs from both countries that began just under a year ago.
A visit with U.S. officials last week in D.C. gave Greiner some optimism that a deal would get done. He said he hasn’t sensed that same optimism, though, in visits with Chinese businesspeople.
“Chinese buyers aren’t quite as optimistic as we are when it comes to thinking about a resolution to this trade dispute,” Greiner said. “Some of them don’t know if a deal will get done anytime soon. So there you go — it’s about 50-50.”
Greiner said he’s optimistic, but acknowledged some of the major topics outside of agriculture are complicated and could end the talks without a quick resolution.
“But you know they (the U.S. and China) are both pretty astute negotiators, so nobody is laying their cards out on the table to see what’s going on,” he said. “And my personal opinion is there are some demands being made that could be lowered a little bit to get a deal made so everybody can walk away as a winner.”
Private Chinese soybean users, however, are looking for a resolution, because they are anxious to get back into buying U.S. beans, Greiner said. “To me, that’s the most optimistic thing I’ve heard.”
Greiner visited Beijing, Shanghai and Guangzhou with fellow ISA board member and president-elect Tim Bardole; Grant Kimberley, ISA’s market development director; and Aaron Putze, director of communications for the group.
China has been trying to curb overall soybean demand in the country and use other oilseed options. Greiner also noted the severity of African swine fever in China is expected to reduce soybean imports as well.
“We’re hearing varying reports that 20% to 30% reduction in the number of hogs, so that is going to have an impact on soybeans too,” Greiner said.
Greiner added that Chinese officials and the pork industry don’t quite know how to deal with the African swine fever problem, but it will likely reduce the number of smaller hog farmers.
“What we’re hearing is a lot of smaller producers are being hit with this disease, and they are probably going to liquidate and go out of business and never get back in,” Greiner said. “So it’s going to take a toll on a lot of smaller producers over here, and in my opinion, it’s going to take time to build their hog herd back up, and when they do, it’s going to be in larger farms and fewer hands.”
Chris Clayton can be reached at Chris.Clayton@dtn.com
Follow him on Twitter @ChrisClaytonDTN
Source: Chris Clayton, DTN
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