(Bloomberg) -- Soybeans weren’t on menu, but it looks like President Donald Trump’s dinner date in Buenos Aires with his Chinese counterpart Xi Jinping could give the market the jolt it’s been desperately looking for.
China will start buying U.S. agriculture products “immediately,” the White House said in a statement Saturday after the highly anticipated dinner on the sidelines of the Group of 20 summit in Argentina. This marks a significant development in the trade war that has beleaguered American farmers.
As tit-for-tat tariffs ratcheted up between the countries, soybeans became the poster child of the trade dispute. China, the world’s dominant importer, started shunning U.S. supplies and Chicago futures tumbled as a result. Across the Midwest, the 2018 harvest had been piling up, unsold, in silos, bins and bags.
The White House called the Trump-Xi meeting “highly successful.” The Trump administration had previously said it planned to push China to resume imports of U.S. soybeans.
It’s hard to overstate how important China is for the soybean world. It’s the biggest consumer by far, using the oilseed as a protein in livestock feed. Chinese tariffs on U.S. shipments have turned usual trade flows on their head. Major exporters like Argentina are now buying dirt-cheap U.S. supplies, while domestic premiums in soy king Brazil surged earlier this year.
Many traders and farmers are hoping an eventual China-U.S. pact can help bring things back to normal, or at least make them more predictable.
Ahead of the meeting, traders had been hanging on Trump’s every word (and tweet), trying to parse out the future for soybean demand. As the talk last week moved from the possibility of more tariffs on China to optimism about a deal, the back and forth left some investors cross-eyed.
A measure of implied volatility jumped to the highest since August and futures volume rose. Underscoring the apprehension, hedge funds got more bearish on the oilseed just days before prices posted the best weekly rally in five weeks.
“The sentiment has changed multiple times over the last two weeks,” Matt Gallik, a market analyst for CHS Hedging LLC, said on Friday.
In Chicago, January soybean futures pin-balled between gains and losses for several days before finally settling up 1.6 percent in the week ended Friday. Just three days earlier, hedge funds boosted their net-short position to 63,862 futures and options, according to data from the U.S. Commodity Futures Trading Commission. The holding, which measures the difference between bets on a price increase and wagers on a decline, was the most bearish in about a month.
Long-only positions and short-only holdings climbed simultaneously as investors grew divided over the market outlook.
As the Trump-Xi meeting concluded late Saturday, U.S. markets were still shut and won’t reopen until Sunday night.
It could be “wild” when trading starts up again, Jim McCormick, a soybean analyst for Allendale Inc. in McHenry, Illinois, said in an emailed report on Friday.
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