CHICAGO, Ill. (RFD-TV) — President Donald Trump announced this morning that the United States and China have reached a new trade agreement, marking what the administration calls a step forward in relations between the two nations. The one-year deal includes China’s commitment to purchase additional U.S. soybeans and an agreement to resolve ongoing shipping disputes.
Rich Nelson, a commodity broker for Allendale Inc., joined us on Thursday’s Market Day Report to break down what this deal means for the ag economy. In his interview with RFD-TV News, Nelson discussed how markets may react to the agreement’s short-term nature and whether investors see it as genuine progress or simply a temporary truce.
“It is certainly good news for us, and it does justify a recent rally we can see in the soybean side of things,” Nelson said, but that the deal likely will not trigger an overall rise across the markets.
He also addressed President Trump’s claim that China will buy “tremendous amounts” of U.S. agricultural products, weighing in on whether those promises could lead to a meaningful rise in commodity prices — particularly soybeans, corn, and wheat — or if traders will wait for confirmed purchase data.
“I think our question about the extent of purchases — that 25 billion tons each year over the next three years — that’s our big question for us in the long term. In the short term, actually, I think this is positive news,” Nelson said. “Because at least for the very short term, China does have a shortfall in that December through February timeframe, and they’ll also want to do a little building of government stocks. So, I do think very clearly that China will do -- this discussion about buying short-term needs. Our question for us, like you mentioned here, is that three years out, the discussion here is for 25 million tons. Also, one thing not included in our discussion: Will China lower its 23% import tariff on U.S. soybeans?”
Nelson also raised additional questions that commodity traders have about the deal, including its impact on soybean oil markets and whether the agreement will include any sales of corn and wheat.
“One thing we are kind of looking at here as far as discussions on soybean oil,” he said. “What impact does this have, especially as we transition into a sharper crush discussion in the coming months? Certainly, one other question for us is – we did not hear corn or wheat in this deal overall, so a lot of questions on that side issue as well.”
In addition, Nelson examined the tariff adjustments announced as part of the deal, including a reduction in China’s fentanyl-related exports and assurances that rare-earth material exports to the U.S. will continue without interruption. He noted that these provisions could carry broader implications for U.S. manufacturing and technology supply chains.
Finally, Nelson discussed the agreement’s one-year term and the potential for market volatility to return if negotiations stall or trade rhetoric escalates in the months ahead. He said that, despite short-term positive momentum, Brazil will likely remain China’s top grain supplier over the next few years.
“It still does leave Brazil as the dominant exporter on the grain side, certainly for China,” Nelson said. “Keep in mind, as far as pricing, if we are kind of including this 23% tariff, which still applies to U.S. products, Brazil is still a cheaper supplier right now. So, China will still buy a little bit from the U.S., but they’ll still lean on Brazil as the dominant supplier in these next few years ahead.”
