By Karl Plume
CHICAGO (Reuters) -The largest U.S. soybean sales to China in more than two years this week could be just the beginning of an accelerated buying program by Beijing after the world’s top importer shunned U.S. supplies for months due to a trade war with Washington.
Even if purchases fall short of the 12 million metric tons that U.S. Treasury Secretary Scott Bessent announced, the uptick in sales has buoyed crop prices.
That triggered a flurry of sales by farmers who were holding their crop hoping for such an uptick. Some Chinese traders also cashed in after booking long positions when prices slumped, but any American farmers who sold their crop before the Chinese purchase deal was announced did not benefit.
It remained unclear how quickly China would reach the target that U.S. officials said Beijing has agreed to. The confirmed purchases of nearly 1.6 million metric tons in three days sent U.S. prices sharply higher to a steep premium over shipments from rival exporter Brazil. That has made U.S. soybeans uncompetitive for other importers like Turkey and Vietnam.
It also creates a problem for Beijing, which does not now need more beans after major purchases of South American crops. China must empty some of its national reserves to make space for the U.S. shipments.
Bessent and Agriculture Secretary Brooke Rollins said China had agreed to buy 12 million tons by the end of this year after President Donald Trump met in October with Chinese President Xi Jinping in South Korea.
Last week, Trump said the purchases would take place before spring. Beijing has not officially confirmed the volume commitment, but Bessent said the deal could be inked by late next week.
In past years China has accounted for 50% to 60% of all U.S. soybean exports, so timing of the purchases is likely to steer soybean prices at least until an official agreement is signed.
“Do I believe China will take 12 million metric tons? I do,” said Dan Basse, president of consultancy AgResource Co. “Do I think China will take 12 million tons by the end of the year? Not a chance.”
The U.S. Department of Agriculture has confirmed 1.584 million tons in sales to China over three days this week, the largest single-week tally since early November 2023, according to USDA data. Traders and analysts said total sales may be closer to 2 million to 3 million tons after a minimal volume was sold ahead of the Trump-Xi summit with other recent purchases below the USDA’s daily reporting threshold.
CBOT soybean futures rallied to their highest point since June 2024 on news of the sales, and the benchmark price was up nearly 12% from mid-October ahead of the meeting in South Korea.
This U.S. price rally coincided with a drop in costs for Brazilian soybeans, widening the U.S. premium to Brazil to around 50 cents per bushel for January shipments, or more than $1.1 million per 60,000-ton cargo. The premium for U.S. shipments in February was as high as $1.10 per bushel, according to traders.
A surge in futures open interest during the rally suggested that Chinese importers were among those taking long positions in the market, betting prices would rise. The positions locked in lower prices before they booked physical sales. Futures have retreated as Chinese traders liquidated those long positions, traders said.
“They have actually bought the futures a long time ago, likely when January beans were around $10 a bushel and prior to Xi meeting with Trump and announcing the trade deal. So they have been long the futures this entire time and are now announcing cash purchases, which means they are actually selling their long futures, which in turn is putting pressure against the January soybean futures,” said Brian Hoops, analyst with Midwest Market Solutions.
Timely data from the Commodity Futures Trading Commission showing trader positions in the futures market was not available due to the recent U.S. government shutdown, with a backlog of data to be released piecemeal over the next several weeks.
U.S. farmers, who struggled with low prices for most of the summer and into the fall harvest, accelerated sales of their 2025 soybean harvest during the rally. Growers are estimated to have sold about 30% to 40% of their harvest so far, based on interviews with six farmers and analysts. These levels would be at or below normal sales in mid-November.
“In some places, the basis is still pretty wide and maybe the farmer is still hoping that the rally may continue,” said Tanner Ehmke, analyst with farm lender CoBank. The basis is the difference between futures prices and the local cash market price, reflecting supply and demand at a particular location.
“There may be some apprehension about selling if farmers are expecting still an ad hoc payment,” Ehmke said, referring to proposed farmer aid payments that have yet to be finalized.
The Trump administration was expected to announce up to $15 billion in aid payments to farmers hurt by low prices and trade disputes, but the government shutdown delayed that plan. Details about the bailout package would be announced “soon,” Agriculture Secretary Rollins said on Wednesday.
After avoiding sales for much of the season due to low prices, Illinois farmer and commodities analyst Sherman Newlin booked some soybean sales as prices began rising. Those sales, booked before the market peaked this week, were below his cost of production.
“We hated to sell, but it’s cash flow. We’ve got a lot of stuff to pay for this time of year,” he said.
Spot cash soybean bids at Archer-Daniels-Midland’s massive processing plant in Decatur, Illinois, a benchmark for the top soy producing state, were $11.23 per bushel on Thursday afternoon. That was at or above the average estimated break-even price for highly productive farmland in central Illinois from $10.87 to $11.23 per bushel, according to University of Illinois economists, and up from $10.42 per bushel a month ago.
(Reporting by Karl Plume in Chicago; Editing by David Gregorio)
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