Agriculture-related exchange traded funds may be turning over a new leaf as China increases purchases of U.S. agricultural goods, including a round of soybean deals and a record weekly purchase of American pork.
According to the Department of Agriculture, private exporters sold 398,000 metric tons of U.S. soybeans to China, the second daily “flash sale” of soy this week to the world’s largest soybean consumer, Reuters reports.
The USDA also added that a net 1.18 million metric tons of soybeans was sold to China in the week ended October 3, along with a record sale order of pork, which included 18,810 metric tons for shipment this year and 123,362 metric tons for 2020.
The sudden shift in trade and influx in agricultural orders come ahead of high-level U.S.-China trade talks in Washington that began today, Thursday. China’s renewed interest in soybeans and pork may be construed as an attempt to de-escalate a prolonged trade war that has gripped the global markets and upended U.S. farm product exports to the world’s largest commodities importer.
U.S. pork exports to China, the world’s biggest hog market, had precipitously declined this year. Meanwhile, Chinese domestic pork prices surged on a combination of diminished imports and supply disruptions caused by a deadly African swine virus.
“Nobody’s ever seen these kinds of (pork sales) numbers,” Bob Brown, an independent U.S. livestock analyst, told Reuters. “Our prices right now are pretty modest especially compared to Europe in particular, which is their other big supplier.”
Given the extreme disparity between supply and demand of pork in China, U.S. prices remain attractive despite the current 72% tariff, according to traders.
If the negotiations prove fruitful and trades returns to normal, commodity investors may look to related ETFs like the Teucrium Soybean Fund (NYSEArca: SOYB) and iPath Series B Bloomberg Livestock Subindex Total Return ETN (NYSEArca: COW) to capture the potential rebound. SOYB tracks three futures contracts for soybeans traded on the Chicago Board of Trade. While there are no pork-specific exchange traded products available, COW provides exposure to lean hog and live cattle futures.
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