As farmers across the Midwest celebrate President Donald Trump's announcement that China will buy 5 million pounds of U.S. soybeans, economists warn that such a small amount will do little to rescue the depressed market. Photo by Jessie Higgins/UPI
EVANSVILLE, Ind., Feb.5 (UPI) -- Farmers across the Midwest celebrated the news that China plans to buy 5 million tons of American soybeans, hoping it's a sign that the trade war may soon end.
"This sale to China, it's a pretty big deal," said Lindsay Greiner, an Iowa soybean grower.
The excitement was apparent in Greiner's voice. Because of the trade war, farmers like him have been unable to sell much of their fall harvests. Millions of tons of beans are being stockpiled all over the Midwest this winter.
But while China's promise may be a positive sign, economists warn that a 5 million ton purchase is far from a windfall -- and it alone will not rescue America's depressed soy market.
"I don't think this should be overblown," said Wallace Tyner, an agricultural economist at Purdue University. "It's not anything like what they usually buy."
Before this year, China was America's largest soy importer, annually purchasing around 30 percent of all the beans grown in the United States. That's about 36 million tons of soy, which is used to feed livestock.
The retaliatory tariffs China placed on U.S. soy over the summer all but stopped the country from importing from the U.S. It sent U.S. soy prices plummeting, and left farmers, like Greiner, storing millions of tons of beans on the farms.
A 5 million ton purchase will barely make a dent, Tyner said. Still, President Donald Trump's announcement Thursday that China will buy more soy had an affect. The following morning, soybean prices inched up.
But the momentum may be short-lived. By Friday, economists were already expressing skepticism that China will follow-through on the promised purchase. And even if they do, it will not be a concession, Tyner said. They need the beans.
Without American beans to purchase, China has bought mainly from Brazil.
"It's being played in the media as a concession on the part of China," Tyner said. "It's not. They needed the beans. Brazil is out."
What is a good sign, Tyner said, is the continued trade negotiations between the U.S. and China. U.S. and Chinese officials completed two days of trade-talks Thursday, and planned to set up a meeting between Trump and Chinese President Xi Jinping in February.
The countries have until March 1 to work out a deal to end the dispute, or another set of tariffs will go in effect. The United States is demanding China stop stealing intellectual property from American companies, Tyner said.
"If the president really is going to meet with the Chinese president, that signals to me that they are going to have an agreement," Tyner said. "You don't escalate back up to high level meetings like that unless you really think you're going to have an agreement. That is what gives me optimism."