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SOYB ETF in Focus as China Allows New Waivers on U.S. Soybean

Sweta Jaiswal, FRM

China’s latest waivers for several state and private companies have infused optimism among investors. State-owned buyers Cofco and Sinograin are believed to be on the list along with five other crushers. The waivers will allow the companies to purchase U.S. soybeans without facing retaliatory tariffs. 

According to a Bloomberg article, the selected companies were provided waivers for purchases between 2 million and 3 million tons. In fact, U.S. Pacific Northwest is believed to have sold around 1.2 million tons to some of these firms.

The decision follows the two-day meeting that started on Sep 19 between deputy trade officials from the United States and China. Per a Reuters’ article, two negotiating sessions were to be held on China’s purchase of U.S. agricultural products, like soybeans (read: ETFs in Focus as Deputy-Level U.S.-China Trade Talks Begin).

How Crucial is the Move?

Soybean could be China’s chief bargaining tool in the ongoing trade war. The country’s soybean imports reached the highest mark in nearly one-and-a-half years in August. In fact, Argentina and Brazil have been seeing rising exports of raw soybean to China, since it imposed 25% tariffs on U.S. soybean imports. It is worth noting here that the United States had exported around $12.2 billion in soybeans to China in 2017, which dropped to $3.1 billion in 2018 (read: 4 Dividend ETFs to Ride Out Trade War Uncertainty).

However, the outbreak of African swine fever has affected demand to some extent. Meanwhile, Trump has been trying to revitalize the agricultural sector, which has been massively hit by his America first propaganda. It is worth noting that the U.S. farm lobby holds major influence in Washington and with the 2020 Presidential elections in sight, Trump is trying to come up with a solution.

Since moves made by the United States and Beijing are being closely watched by investors, China’s waivers will be considered a reconciliatory gesture. In fact, following Trump’s move to postpone the planned tariff increase of 5% on $250 billion of Chinese goods from Oct 1 to Oct 15, China had announced renewed purchases of U.S. farm goods. Per the source, China purchased a minimum of 10 cargoes, or 600,000 tons, of U.S. soybeans for October-December shipment. 

The Teucrium Soybean ETF SOYB in Focus

The fund provides investors unleveraged direct exposure to soybeans without the need for a futures account. It has AUM of $28.1 million with an expense ratio of 1.15%. The fund has gained 2.4% in the past month (read: SOYB ETF in Focus as China Opens Door to Argentine Soy Meal).

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Teucrium Soybean Fund (SOYB): ETF Research Reports
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