China signs US soy export deals, but unclear if sales will follow

U.S. soybean exporters have recently seen less action than usual from top customer China, though the two parties signed a deal on Monday that could pave a path toward more Chinese purchases.

The potential timing of those sales is uncertain, as similar agreements in the past have sometimes led to immediate announcements of large U.S. export sales while other times they have not.

Chinese importers on Monday signed agreements to buy billions of dollars’ worth of U.S. agricultural goods during a ceremony in Iowa, mostly believed to be soybeans. This was the first such bulk signing since 2017, though unlike past events, this one was minimally publicized.

Details of the signing from the U.S. Soybean Export Council (USSEC) on Tuesday were also unusually thin as neither volumes nor commodities were specified as normal. It is not clear why this event, which in past years was accompanied by much fanfare, was seemingly downplayed on the U.S. side.

The agreements are nonbinding letters of intent to buy at a later date, so the signing does not necessarily suggest a sale has occurred. Therefore, large daily sales announcements from the U.S. Department of Agriculture are not guaranteed to follow.

The last such signing took place in Beijing in early November 2017, though the next daily U.S. soybean sales came at the end of that month. The volumes were seasonally normal, so it is not obvious whether these sales were linked with the deal.

However, the record daily U.S. soybean sale of 2.92 million metric tons to China came two days after a signing ceremony in Iowa in February 2012. Some of the other biggest daily soybean sales also immediately followed signings.

As of Oct. 12, China had purchased just under 10 million tons of U.S. soybeans for delivery in the 2023-24 marketing year, which began on Sept. 1 for U.S. beans. Outside of the trade-war years of 2018 and 2019, that is the lowest volume for the date since 2008.

U.S. soybeans have been edged out on the global market by a monster crop from top exporter Brazil, and relatively stagnant Chinese demand has not helped. However, China’s U.S. purchase volume is relatively small, potentially suggesting minor room for growth.

As of Oct. 12, only 47% of all U.S. soybean commitments for 2023-24 were to China, below the date’s three-year average of 53%. Given current sales levels, that difference is worth 1.2 million tons.

Karen Braun is a market analyst for Reuters. Views expressed above are her own.

Tags: China, soybean, USA