Analyst: Negativity surrounding ceasefire’s impact on ag is nonsense

Unknowns regarding the 90-day trade truce between the U.S. and China still persist. It’s some of those unknowns causing bearish outlooks to surface, with some economists and analysts saying China won’t buy U.S. ag goods right away. However, Allendale’s Bill Biedermann says that negativity is nonsense.

Tuesday morning on Fox Business Treasury Secretary Steve Mnunchin said agriculture will be the first line item in trade talks. He said, “Our expectation is that there will be specific deliverables” and timelines from China.

Biederamann said farmers will be the first beneficiary of any deal with China, followed by natural gas. Mnuchin said Monday the deal with China could be worth $1.2 trillion. Biedermann said with a deal that big, it will take time to iron out details, but the rewards from any deal for agriculture could be great.

“That’s a lot of money and a lot of trade,” said Biedermann.

Agriculture Secretary Sonny Perdue said on Monday in Chicago that he thinks China will come back to the market and start buying January 1, 2019, while the current tariffs on agriculture goods still remain in place. However, Biedermann doesn’t think the tariffs will harm ag exports in the interim.

“I don’t think that’s going to be an issue for the market,” said Biedermann. “I think they are going to buy anyway. It is going to take some time. This is a really big deal, and if I was China, as far as I’m concerned, I would be telling all my buyers ‘go out and get it bought, get it bought now, and then after you have it bought, I’ll announce we’re going to reduce the tariffs on U.S. beans.’ Everybody will make money if they do it that way.”

Perdue also said Monday China would buy a number of U.S. ag goods, including rice, poultry, sorghum, wheat, pork and soybeans

Despite the good news, Biedermann said traders continue to be bearish. That bearishness isn’t necessary, as he thinks China is already coming back to the market to buy.

“I don’t agree with all these people who are bearish, saying it’s not going to happen,” said Biedermann. “in fact, there are have been three U.S. ‘unknown’ purchases of soybeans in the last five days. I think it’s about ten cargoes. It’s a lot of beans. I think that could be China. I don’t know—I’m just guessing, but I do know they’ve bought some pork lately, too.”

Biedermann said when you look at recent exports, the shuffling game has already happened for soybeans, with countries stepping up to buy U.S. soybeans.

“We’ve had about 300 million bushels of buys outside of China—non normal buyers- buy from us,” said Biedermann. “That’s a pretty good amount of demand.”

He said if you look at the exports already on the table, and then you throw China into the market and they start buying, it only builds into that momentum.

‘”I don’t’ think there’s a lot of downside in this market,” said Biedermann while looking at the soybean price chart. “I think we’re at value. If we can confirm China is buying what the market wants, we’ll take out $9 and go even higher, at least technically.”

Biedermann thinks if China isn’t already in the market buying U.S. soybeans, those purchases could come very soon. So, his advice for producers? Don’t fall into the bearish trap.

“I don’t think you should be so negative and be influenced by all these negative comments,” said Biedermann. “Yes, it’s going to take some time, nobody knows when it will be, but it’s not bearish, by any means.”

“Reprinted by permission of Farm Journal media, December 2018”