China Will Reportedly Pause Soybean Purchases: Stock Futures Down

June 1, 2020
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U.S. stock market futures fell ahead of trading this week, with reports that China is preparing to pause its purchasing of American soybeans.

Soybeans are a major export product for U.S. farmers, with China being the largest purchaser. China had previously agreed to increase its purchasing of agricultural products, as part of a preliminary trade deal signed with the Trump Administration.

Mixed News in Recent Weeks

China said earlier last month that it would be increasing its soybean purchases from the U.S., as other major suppliers struggled to meet demand.

According to the Chinese government, state-run buyers had bought more than 1 million metric tons of American soybeans during the first two weeks of May. The purchases were made with the advantage of tariff waivers, as agreed in the Phase 1 Trade Deal.

Now China could be walking back on its promise to increase its purchases. According to a Bloomberg news report today, officials in the Chinese Government told their state-run agricultural businesses to halt the purchase of American soybeans and other farm goods. This is in response to escalating trade tensions.

The U.S. recently criticized a Chinese law designed to undermine democracy in Hong Kong. The U.S. State Department then revoked the region’s special trade privileges. Hong Kong, once a British Territory, has existed as a Special Administrative Region of China since the United Kingdom transferred its ownership in 1997.

Should Stock Investors Be Concerned?

This latest development could lead to a drop in confidence in the market this week. There are also domestic tensions in the U.S. related to riots and looting in several major metropolitan areas.

Stocks could be slow to rise this week, especially considering that the nation is still battling the COVID-19 outbreak.

Stocks did rally last week so there is hope that the economy can recover from all these co-existing issues. Investors should watch the markets closely, follow signals from news stories and stock movement, and only make informed picks without emotional bias.

The fact that the market was able to report gains last week is a sign that there’s an upside to this current economic slump, and that could mean strong positive price movement is on the horizon.

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