Tensions are growing between the U.S. and China. President Donald Trump held a press conference on Friday, May 29, throwing out a laundry list of actions by China – actions the President says need to stop.
The White House accused China of theft and blamed China for its mishandlings of coronavirus in the beginning, including accusations China withheld information. The Trump Administration even announced the decision to terminate the Unite States’ relationship with the World Health Organization because of it.
While the President announced actions against China and some Hong Kong leaders on Friday, including suspending the entry of certain foreign nationals from China who are deemed a security risk, he says all actions are to protect the American people, as well as national interests.
Included in the list of actions the President announced Friday, there was no mention of the phase one trade deal with China. But some speculate that trade agreement could be at risk as tensions rise.
As the story continues to unfold on what will happen between the U.S. and China, just this week, China bought more U.S. ag goods this week, including 66,000 tonnes of new crop soybeans. This is a positive sign, explains Alan Brugler of Brugler Marketing.
“The Chinese are nibbling here,” Brugler says. “We've been anticipating they'd buy a lot of new crop. We really want them to buy some old crop to tighten things up a little bit. They did buy quite a bit of Brazilian stuff that was shipped in April and also in May. So, we are not anticipating any immediate shipments in any kind of quantity.”
Brugler says while China isn’t buying old crop, he knows recent actions regarding Hong Kong will make a difference moving forward.
“Obviously, what the President decides to do with Hong Kong has a bearing on that, whether they would choose to slow down purchases,” Brugler says.
Brugler says he’s encouraged by private firms in China starting to inquire more about orders from the U.S. Andy Shissler of S&W Trading says interest from China has been growing, but that was prior to Friday.
“For two years, we didn't do much of anything,” Shissler says. “We have some commercial accounts and it was shut down. For the last five weeks, we've seen kind of a regular return to some of our business. We do contracts usually about three of every five days. We hadn't seen interest from private companies and we're seeing some of that.”
Shissler said some of that interest did slow down earlier this week, largely due to issues with Hong Kong. But he says some pent-up demand is starting to surface.
“I hope it doesn't stop,” Shissler says. “I don't think that it will. But they'd had pent-up buying for quite a while here. And so, a lot of these guys were ready to do stuff. It's been really active.”
While all bets may be off after Friday’s press conference at the White House, Brugler says earlier this week, he continued to hear China could start stepping up to make more buys.
“We'd hoped we'd see a lot of ethanol interests, but of course, with the slowdown in the economy over there, they're not going to be in any hurry to buy a lot of ethanol,” Brugler says. “The big question is, are they going to expand their tariff rate quota on corn from the seven or eight million tonnes to something larger? We've lost a lot of ethanol demand here, but if they do step up their export program in the corn side of things, that would really tighten up our balance sheet.”
A boost from buys of ethanol by China is still a possibility, according to Shissler. He thinks China could still buy more corn, as well as U.S. ethanol.
“I think they would have done both already if it wasn't for the virus,” Shissler says . “I mean, all the shipping got messed up, so how are you really going to do it between transportation and everything else? I just think it really derailed that phase one deal by a good three months.”
Shissler doesn’t think China will make their own ethanol. Instead, he thinks the country will source it from other regions like the U.S. All eyes will be on China’s actions next week after the U.S. announced new restrictions and actions against China Friday.