DTN Lead Analyst Todd Hultman said China's announcement that it is carrying out the tariff waivers promised in September is in line with China's self-interest and "we shouldn't read too much into whether or not it means a limited trade agreement with the U.S. is close," Hultman said.

Before the tariff wars hit in July 2018, soybean sales were hitting about $14 billion a year in value but soybean exports dropped precipitously after the tariffs were set and China began importing more aggressively from South American countries. Keeping to a commitment to re-establish higher soybean sales, China has bought roughly 9.6 million metric tons (356 million bushels) of soybeans in the 2019-20 marketing year. That compares to about 19 million bushels sold the same time a year ago.

The move on soybeans allows China to take better advantage of lower U.S. prices and higher stocks following the U.S. harvest. "Soybeans are also important to the country and allowing Chinese companies to bypass China's own tariff means they have greater access to U.S. soybeans which are currently trading at FOB (Freight on Board) prices 43 cents cheaper at the U.S. Gulf than in Brazil," Hultman said.

The seasonal price advantage for U.S. soybeans typically lasts through January and then switches to Brazil as the next harvest becomes available. According to USDA, Brazil is on track to harvest a 4.52-billion-bushel crop in early 2020.

Also affecting China right now is African swine fever, which has eliminated as much as half of China's overall swine herd and sow population. Since midsummer in China, the price of pork has soared and China has increased its U.S. pork purchases despite its own tariffs. For 2019, the U.S. has exported more than 302,400 metric tons of pork to China and still has outstanding sales of 127,500 metric tons. Through October, the U.S. Meat Export Federation shows pork sales to China had high $974.8 million, up 34% from a year ago.

"It is no secret that the country has been importing pork to try to counter the price increases that have resulted from African swine fever," Hultman said.

Rachel Gantz, a spokeswoman for the National Pork Producers Council, said NPPC welcomes the reports and ideally that will translate into higher sales in the short-term. NPPC had just released a report highlighting that U.S. pork production could double if China removed all tariffs.

"Most importantly, NPPC seeks permanent removal of all punitive tariffs for at least five years to address China's unique pork supply need," Gantz said. "With African swine fever dramatically reducing domestic production, the United States is well positioned to meet China's need for safe, nutritious and affordable pork and to manage an emerging food price inflation challenge. In doing so, U.S. pork can single handedly put a huge dent in the United States' trade imbalance with China."

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(CZ\SK)

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