Chinese state-owned companies are said to have begun contracting three million tons of US soybeans and corn in a goodwill move to smoothen talks with the US on the Phase One Trade Agreement that has ended on December 31 last year.
At least five market sources confirmed on Thursday that there have been rumors of state-backed purchases. Two sources said this round of soybean buying volume is 1.5-1.7 million tons and the rest of the 3-million-tons target is allocated for corn.
This rumor coincided with a stronger CBOT soybean futures that have rallied more than 2% since the start of this week. However, some expect the rally was fuelled by estimates of lower 2021/22 soybean output in Brazil due to poor weather condition.
Nonetheless, it would not be a surprise to the market if the rumors were true as the progress of Chinese purchases under the Phase One deal have been below target.
China imported about US$74 billion worth of US agricultural goods by the end of November last year, which was still about US$6 billion short of the target for 2021, according to data provided by the US Office of Trade Representative (USTR).
The US response on the outcome of the agreement could be pivotal to US-China relation throughout the rest of Biden’s first term.
China’s Ministry of Commerce said last week that the two sides are engaging in “normal communications”, and it hopes “the US side can create a good atmosphere and conditions for both sides to expand trade cooperation”.