Market Analyst breaks down U.S./China Trade Framework

The recent meeting between Presidents Trump and Xi is one of the biggest market movers seen, according to Jim McCormick, the co-founder and chief operating officer of the marketing and consulting firm AgMarket.net. Making clear that the meeting’s result is a framework, not a deal per se, McCormick described a market phenomenon that is rare and counter to the buy-the-rumor-sell-the-fact adage. It began with a soybean rally on merely the anticipation of U.S. Treasury Secretary Scott Bessent coming to an agreement with China.

“Coming out of the weekend, Scott Bessett said, ‘We have a deal,’ and the bean market rallied. A few days later, President Trump came out and said, ‘We have a deal,’ and the bean market rallied. And then, here recently, the Chinese actually fulfilled part of the deal, a very small portion of it. They did start buying beans, and the bean market rallied again,” said McCormick, during a panel discussion at the National Association of Farm Broadcasting annual convention in Kansas City. “So, I've been doing this for 30 years. I can tell you; I've never seen a market where you bought the rumor three times, and then you turn around and bought the fact.”

Recent soybean shipments to China are a hopeful sign that the country is bargaining in good faith, according to McCormick. Some of those shipments included a few unit trains’ worth of soybeans and corn coming from South Dakota, North Dakota and Minnesota. Purchases as of late, the week ending November 21^st, amount to only about ten percent of the amount the Trump administration says China has committed to this year.

“Now I'm taking it as an optimistic viewpoint, the fact that they are buying beans right now while these final negotiations are going on, that they are going to follow through in their commitment. But I am a little bit skeptical also, because you've got to remember, the beginning of the year, we were thinking China was going to buy around 25 million metric tons of beans,” McCormick pointed out. “That's roughly what they've been buying on average the last couple of years. This deal is only 12 million metric tons for this marketing year, [which] is what it sounds like. So, the sales are only going to be half of what we thought they were going to be.”

Judging from China’s past performance, McCormick is somewhat skeptical but at the same time hopeful that commitments will be adhered to.

“If they do fulfill [purchase commitments], I think it does keep that balance sheet a little bit interesting. It's going to keep that carryout potentially below 300 million [bushels] and it should keep the prices elevated,” he said. “But if, for some reason, China does not fulfill this purchase agreement, I think these prices do look [higher than justified by market conditions].”