China Reopening to US Soybean Imports

They have much to soy-lebrate: China promised last week to restore the soybean import licenses of three firms that play a major role in American agriculture, effective today.

The move signals a thawing in the on-again, off-again trade fisticuffs between the two nations that have captured more headlines this year than Pope Leo XIV’s baseball loyalties. But farmers who actually grow soybeans might want to hold off on popping their edamame just yet. 

Soybean Counter

China stopped buying US soybeans altogether in May, two months after suspending the import licenses of US-based CHS Inc. and EGT and the Netherlands-based Louis Dreyfus, which does a big chunk of its business stateside. A key part of Beijing’s response to US tariffs, the move effectively locked American soybean farmers out of their largest export market, which purchased $13 billion worth of their product the previous year.

For an already challenged industry, the impact has been devastating. The Federal Reserve Bank of Minneapolis wrote in September that bankruptcies among Midwest farms are ticking up, albeit from historically low levels, and “there are reasons to expect a continued increase.” Since about 2014, farms have regularly had revenues squeezed by low crop prices, which the Minneapolis Fed noted has led them to borrow money against their land. That’s reflected in Department of Agriculture data, which shows farms’ cash reserves have fallen from $227 billion in 2012 to $168 billion this year, while their debt has climbed from $410 billion to $591 billion.

Then, as US and Chinese officials hammered out the details of an economic agreement last week, Treasury Secretary Scott Bessent said China pledged to purchase 12 million metric tons of US soybeans by the end of this year and 25 million for the next three years. CHS, EGT and Louis Dreyfus, meanwhile, will have their licenses reinstated today. While not nothing, of course, the import pledge comes in under the 10-year average of 29 million metric tons per year. Whether it stimulates enough demand remains to be seen:

• The news that China would again become a US buyer pushed soybean futures up slightly on Friday. Notably, word of the agreement sent the benchmark per-bushel price at North Dakota’s Walsh Grain Terminal over $11 last week, the highest in more than a year.
• The issue is that $11 is still merely the break-even point for soybean farmers this year, according to research from the University of Illinois’ Department of Agricultural and Consumer Economics, meaning it’ll take much more to relieve the financial pressures they’re facing.

Ballots to Bailouts: Almost 78% of US farmers voted for President Donald Trump, making them a very important political constituency for the White House. To that end, the president has said in recent weeks that he’s considering a $10 billion bailout package for farmers affected by China’s trade maneuvers. During his first trade war with Beijing, Trump gave farmers over $22 billion in aid payments.