Trade

China Buys Brazilian Farm Goods Ahead of “Phase One” Signing

JM Ashby
Written by JM Ashby

We now know that Chinese and American officials will sign "phase one" of Trump's "biggest and greatest deal ever" on January 15th, but before they sign it the actual consequences of it are in doubt.

The half-assed deal is centered around new purchases of American farm goods on top of what Chinese already purchased in 2017 before Trump's trade war began and the centerpiece of these new purchase is large orders for American soybeans.

Now, China has only pledged to buy what market conditions and consumer demand will allow and it appears that market conditions have led to them booking shipments from Brazil through the next three months.

Sources who spoke to Bloomberg off the record say Chinese importers are buying up shipments from Brazil because they will still be cheaper than shipments from the United States after the deal is signed.

Private buyers from China have purchased about 10 cargoes from the South American nation so far this week, said the people, who asked not to be identified because the deals are private. Most of the soybeans are for shipments from January through April, the people said.

The Brazilian purchases, while not unusual for this time of year, come just as the U.S. and China are expected to sign a phase-one trade pact on Jan. 15. They also highlight China’s willingness to buy American supplies only when they are cheaper than elsewhere.

Brazil, the world’s largest soybean exporter, is starting to harvest what is forecast to be a record crop, bringing prices down. Brazilian supplies are cheaper than those from the U.S., attracting private Chinese buyers who only focus on crushing margins, according to Monica Tu, an oilseed analyst at Shanghai JC Intelligence Co.

These would be the "market conditions" we keep hearing about.

It's not that hard to imagine a time in the coming months when it will become clear to all that China is not buying as much as Trump promised they would and it's anyone's guess what he'll do when it finally reaches his brain. At some point, farmers and then members of congress who represent them will start asking questions, like 'where's the beef?'

I honestly have no idea if Trump will simply insist everything is going well when reality sets in, or if he'll escalate his trade war again. Maybe both.

  • muselet

    The irony is not lost on me that after seventy years of hearing Rs howl about Chinese commies! and their evil command economy!, an R administration is moaning that the Chinese government is acting too capitalistic (“They also highlight China’s willingness to buy American supplies only when they are cheaper than elsewhere.”).

    As for what will happen when Donald Trump has to face reality, I dread to think. Deny-and-escalate is a good guess.

    –alopecia