Crops Surge on Prospect China Will Step Up Buying in Trade Truce

(Bloomberg) -- Soybean futures jumped to the highest in more than three months, while corn extended gains, on news that the U.S. and China reached a partial agreement in the trade war that could lay the groundwork for a broader deal.

China would agree to some agriculture concessions as part of the deal while the U.S. would offer tariff relief, according to people familiar with the matter. The pact is tentative and subject to change as President Donald Trump was due to meet Chinese Vice Premier Liu He in Washington this afternoon, just after grains markets close on the Chicago Board of Trade.

“There’s a lot of expectations we get a deal,” Jack Scoville, vice president at Chicago brokerage Price Futures Group Inc., said by telephone.

China already had discussed boosting purchases of U.S. agriculture products such as soybeans, pork and wheat. The world’s top soy importer had already been buying both the oilseed and pork in the U.S. as recently as the week ending Oct. 3, U.S. government data showed. Hog, cotton and ethanol futures also gained in Chicago.

“The key will be whether these are true concessions – enforceable elimination of trade barriers and tariffs on U.S. farm products, including soybeans, corn, DDGS, wheat and ethanol, to name a few – or whether it’s just China’s commitment to step up purchases,” said Bryce Knorr, a senior grain market analyst at Farm Futures.

The meeting and potential risks surrounding wintry weather in the northern U.S. and in southern Canada that could curb supplies of some crops prompted some grain traders to close out bets.

“It feels like a huge risk-off event ahead of the weekend,” said Joe Nussmeier, a broker at Frontier Futures in Minneapolis.

Some traders remained skeptical buying soybeans from the U.S. represented a significant breakthrough in the overall trade talks, according to people familiar with the matter. China has been buying soybeans in Brazil in the past two days after some goodwill purchases from the U.S. and the strategy of switching between the two countries has helped China secure lower prices, the people said.

“China needs soybeans right now because Brazil’s supplies are exhausted,” Knorr said. “But even if they wind up taking 30 million metric tons as reported, total U.S. exports likely would still be” lower than before the trade war began, he said.

Goodwill purchases of soybeans have been taking place since December and a full deal still hasn’t been reached.

“I am a bit pessimistic this could be the real deal as we have stumbled on the finish line a few times,” said Niko Anderson, a grain broker at SCB Group in Chicago. “While recent export sales out of the Pacific Northwest seem very encouraging, we have seen China buy before without any deal actually being reached.”

To contact the reporters on this story: Michael Hirtzer in Chicago at mhirtzer@bloomberg.net;Isis Almeida in Chicago at ialmeida3@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Millie Munshi

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