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The world’s two largest economies are finally playing nice, starting first with soybeans. Over the past 24 hours, China has bought 1.5 million to 2.0 million metric tons of American soybeans, according to information from the United States (US) Soybean Export Council on Wednesday.
Citing industry sources, the US soybean council said state-owned firms from China are stocking up their purchases in the product, and the shipments are expected to take place before March next year.
As part of the trade truce talks between both countries, China President Xi Jinping said China would ramp up on purchases of American products. Mr Xi had conceded to the arrangement with the agreement that US President Donald Trump puts a hold on enacting the new China tariffs.
The US has hit a total of US$250 billion worth of Chinese goods with tariffs since July, and China has retaliated by imposing duties on US$110 billion of US goods. Currently, US$50 billion worth of Chinese goods are already taxed at 25%.
US soybean futures hit 4.5-month high, Asian equities up
China’s latest mega purchase brings great relief to US farmers. In 2016, China had shunned imports from farms in rural communities in America, leading to a backlog of unsold goods and a pile up in inventories across the Midwest of US. Futures in Chicago had fallen with this impact.
On Wednesday, US soybean futures hit a 4.5 month high following the news of China’s state-owned firms’ buying up soybeans. According to US traders, the purchases were valued at more than US$180 million.
Even though imports from China have taken a downward slide over the years, China was still the largest buyer of US’ soy in 2017, importing around 60% of all US overseas shipments. But the trade war spat between both nations have led to a greater fall in US' exports to China due to the higher tariffs.
China had slapped a 25% retaliation levy on soybeans after Mr Trump imposed tariffs on billions of dollars of China’s goods.
Following news on the good rapport seen from China’s latest move, Asian equities witnessed light positive trading on Thursday, as optimism grew over a possible agreement happening between both parties within their 90-day truce period. An update from Mr Trump earlier in the week saying that negotiations between both nations are underway also contributed to the relief.