A harvest of soyabeans (Photographer: Paulo Fridman/Bloomberg)

U.S. Farmers Rue China's Return to Soybean Market as ‘Drop in the Bucket’

(Bloomberg) -- China’s return to the U.S. soybean market this week comes too little, too late for many Iowa farming families to put more Christmas presents under the tree this year, according to third-generation grower Brent Renner.

Renner said he’s cautiously optimistic after reports of the first U.S. purchases by China since Donald Trump and Xi Jinping agreed to a 90-day trade war ceasefire. But volume so far is “a drop in the bucket.”

“We have a long way to go,” he said. “With an administration like Trump’s you could see the magical tweet tomorrow and it could be better or worse.”

American soybean farmers, many of whom still support Trump’s push for better trade terms with China, found themselves caught in the cross-fire after Beijing slapped a 25 percent retaliatory tariff on their crop. Losing their biggest buyer has been a body blow, with rising bean stockpiles a reminder of their shrinking incomes.

Renner’s wait-and-see approach is shared by investors. Futures fell Thursday even after the U.S. Soybean Export Council said China bought 1.5 million to 2 million metric tons of American-grown beans.

U.S. Farmers Rue China's Return to Soybean Market as ‘Drop in the Bucket’

To put the purchases in perspective, China buys 30 million to 35 million tons of U.S. soybeans in a normal year, U.S. Agriculture Department Deputy Secretary Steve Censky, said on the sidelines of the Iowa Soybean Association meeting Thursday.

“Some of this was already cooked into the market before the purchases on the anticipation,” Censky said. “We’ve exported virtually zero up until this point and so, again, having a 1.5 million-ton start is just a start.”

Censky said the administration is pushing China to make agricultural purchases beyond soybeans as part of “good faith for the discussions” to ultimately end the spat.

Even before the trade war, farmers had been doing it tough. Net farm income has fallen four out of the last five years and is projected to be $66.3 billion in 2018, or 46 percent of 2013 levels, according to USDA.

“I bet there’s less people buying Christmas presents this year,” Renner said.

Tim Bardole, a fifth-generation farmer from northwest Iowa who grows soybeans with his father and son on 2,300 acres (930 hectares), said initial purchases from China “definitely relieves some of the stress.” But “the trade is skeptical until they see the ships go.”

He said the timing of China’s initial purchases are made more difficult for Iowa farmers because of winter. They either send supplies out by rail to the Pacific Northwest or down the Mississippi River to the U.S. Gulf. Winter weather impacts the basis, because during those months shipping along the river can be constrained.

Jeff Ellis, a second-generation farmer from southeast Iowa, says the trade war couldn’t have come at a worst time just as the market was showing signs of recovery. Still, he said Trump was right to stand up to China. He said he’s “nervously optimistic” that gains will be made over the remaining 80 days of the detente.

©2018 Bloomberg L.P.