US farmers cheered the Trump administration's announcement of a potentially dramatic increase in US agricultural sales to China on Friday but warned they needed to see a follow-through of actual purchases.
Treasury Secretary Steven Mnuchin said the agricultural purchases could scale up to $40 billion-$50 billion annually as part of a partial trade deal, potentially more than doubling the $24 billion in agricultural and related products China purchased from the United States in 2017.
Farmers, who relied on China as the top buyer for US soybeans and sorghum and a key market for pork and dairy, have seen their incomes plummet during the 15-month conflict of tit-for-tat tariffs between the world's two largest economies.
"I'm excited," said Monte Peterson, a farmer in Valley City, North Dakota, of the first phase of a trade deal. "That's a pretty good announcement for US ag."
It will be important for China to actually take delivery of US farm products and not just announce purchases, however, Peterson said.
"We have to see it through," he said. "We have to see it loaded and shipped out."
At a news conference after talks with Chinese Vice Premier Liu He, US President Donald Trump joked that the partial deal meant farmers "are going to have to work a lot of overtime." Neither he nor Mnuchin gave details on which products China had promised to buy.
"We're encouraged by the news of a trade deal with China and look forward to learning the details," Tyson Foods (TSN.N) spokesman Gary Mickelson said.
China imposed an additional 25% retaliatory tariff on US soybeans in July 2018, resulting in piles of unsold US crops and dragging prices to multi-year lows. Trump has pledged a $28 billion bailout package to compensate farmers, who widely voted for him in 2016.
"Our farmers are resilient, but they need a long-term resolution to this trade war where US soy can be imported into China by all importers without any retaliatory tariffs," said Jim Sutter, CEO of the industry group US Soybean Export Council.
China has mainly relied on Brazil and Argentina for soybean imports it uses to feed livestock for nearly a year and a half, but the preliminary deal could shift trade flows to the United States. Even so, South American growers said a deal would bring needed stability to global markets.
"If they reach an agreement, it will be a lot easier for Brazilian soybean farmers to make projections and calculations," said Cayron Giacomelli, soy producer in Mato Grosso state.
China has already ramped up purchases of US pork ahead of the trade talks in Washington, with the US government reporting record-large weekly export sales on Thursday. Millions of Chinese pigs have died from a deadly disease in recent months, sending China on a global pork buying spree.
Economist Bill Lapp, president of Omaha, Nebraska-based Advanced Economic Solutions, was skeptical of the up to $50 billion figure.
"We've seen these big-dollar figures before, and they don't always come to fruition," he said.
US soybean prices climbed to the highest point since the start of the trade war ahead of the announcement on Friday. Trump said it will take up to five weeks to get a written agreement.
"We are encouraged that both sides are at the negotiating table because it is important to reopen this market for American farmers," global commodity trader Cargill Inc said in an emailed statement.
China imported more than 13 million tonnes of US soy in the 2018/19 marketing year that ended Aug. 31 and has bought nearly 5 million tonnes more in the current season, according to government data. The sales were far short of the 30 million tonnes or more that China imported annually from the United States before the trade war.
While Mnuchin told reporters Trump had agreed not to increase tariffs on $250 billion of Chinese goods to 30% from 25%, there was no mention of removing the tariffs that have been in place for over a year.
Advocacy group Farmers for Free Trade said it was too soon to celebrate a deal.
"The promise of additional ag purchases is welcome news but details on timeline, price, commodities and many other questions will have to be answered," Brian Kuehl, co-executive director of the group said in a statement.