New Delhi — The global soybean market, including China, is optimistic that the high-level US-China trade talks, scheduled to begin in Washington on Thursday, will have a positive outcome, trade sources said.
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The administration of US President Donald Trump will be represented by trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, while Vice Premier Liu He will head the Chinese delegation during the two-day talk, which marks the 13th round of negotiations between two of the world's largest economies.
In the past few weeks, China has purchased around 2 million mt of US-origin soybeans, to show its seriousness in resolving the trade dispute with the Americans, a market source said. The Chinese soy buyers have been cautious over the past couple of days, as they await the outcome of the Washington talks.
A successful trade deal may be difficult to achieve during this round of talks as the US is set on discussing contentious issues, such as intellectual property theft, forced technology transfers and currency manipulation, while China wants to put these matters aside and focus on removing the mutual tariffs, an industry source added.
Since July of last year, US-China trade tensions have escalated, with both sides levying multiple retaliatory tariffs on each other. Despite several rounds of talks since December, an agreement could not be reached.
While the US has already imposed or plans to impose import tariffs on more than $520 billion worth of Chinese goods, China has retaliated swiftly by levying import duties on $120 billion of US goods so far, including soybeans.
As the US-China trade dispute lingers on, Beijing has looked to South America to replenish its huge soybean demand, market sources said.
Before China slapped a retaliatory tariff on US soybeans in July last year, China bought 29.6 million mt of US-origin soybeans, accounting for 55% of total US exports over July 2017 to June 2018. Over July 2018 to June 2019, China's imports of US beans fell 77% year on year to 6.7 million mt.
US-China trade relations hit a new low when both sides announced yet another round of retaliatory tariffs in August. While the Trump administration has been accusing China of not buying enough US agricultural products as promised, Beijing has charged the US with bullying during trade talks.
The US is the world's second-largest soybean exporter, behind Brazil. Both nations combined, account for over 80% of global soybean sales.
A trade resolution is beneficial to both sides, another market source said. As the US soybean farmers confront plummeting soybean sales, Chinese buyers may experience supply-side constraints in the fourth-quarter as South American soy inventory depletes.
In the coming months, China may have to turn back to the US soy farmers, who are sitting on a high level of soy inventory.
US soybean stocks are estimated at 29.13 million mt at the end of 2018-2019 marketing year (September-August), up 144% year on year, the USDA said in its monthly report.
China is the world's biggest soybean importer, with an average yearly demand of 88 million-90 million mt, accounting for around 64% of global soy purchases.
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