The question hanging over U.S. agriculture this summer is no longer whether Washington and Beijing are talking again. The question is whether the latest agreement between the two countries will turn into real business for American farmers and when that could happen.
The White House announced on Sunday that China will purchase at least $17 billion annually in U.S. agricultural products through 2028, in addition to soybean commitments already discussed between U.S. President Donald Trump and Chinese President Xi Jinping. The announcement initially sparked optimism across commodity markets, sending grain prices sharply higher as traders hoped for a revival of the Phase One trade relationship established during the first Trump administration.
But as the week progressed, enthusiasm cooled. Traders and analysts began asking the same question they were asking at the end of last week: Where are the details?
Markets Want More Than Headlines
Dan Basse, president of AgResource Company, says the market reaction reflects a tug-of-war between improving crop conditions at home and the possibility of stronger export demand abroad.
“So, you know, it’s not that they’re doubting China,” Basse says. “And I think the point is we want details, and the markets are never patient, right? Ahead of them, we still have this thing called a war that’s ongoing with Iran. And there was news about maybe the possibility of some kind of peace accord that would always cause the war trade unwind.”
At the same time, Basse says farmers are looking at relatively favorable growing conditions in much of the country.
“We’ve got a relatively good start for crops,” Basse says. “They went in the ground easy. We’re now turning the calendar to June and things look relatively good, at least at this point, excluding the Western Plains where it’s still so dry and there’s a wheat problem. So the market’s struggling, if you will, with this idea of, ‘I’ve got a crop in the ground and farmers need to sell some old crop,’ along with ‘We’ve got this new potential shiny thing called China, better demand and something that looks like the Phase One agreement.’”
That uncertainty caused markets to pull back after the initial rally, even as optimism about Chinese demand remained in the background.
A Return to the Phase One Playbook?
Gregg Doud, president and chief executive officer of the National Milk Producers Federation, says the structure of the new agreement strongly resembles the original Phase One trade agreement negotiated during President Trump’s first term.
Doud, who served as chief agricultural trade negotiator during that administration, says those earlier talks took nearly a full year and involved extensive negotiations.
“Well, Phase One, the negotiation took us the entire year of 2019,” Doud says. “It was 33 negotiating sessions. We fixed 57 things in agricultural trade between the United States and China. And it really kind of took our exports from about 26 to 38 billion, as I remember.”
Doud says the earlier agreement nearly achieved its ambitious purchase goals before the COVID-19 pandemic disrupted global trade patterns.
“And remember, the Phase One purchase commitment was 80 billion over two years,” Doud says. “So when — and that was right before COVID hit — we got to 38 out of 40. So we were really actually pretty close on the aspirational purchase commitment.”
Now, Doud says the current agreement appears designed to restore trade flows to levels that already existed before relations between the two countries deteriorated.
“So here we have, again, the same thing,” Doud says. “Seventeen billion plus the soybean side of the equation. If you look at the old numbers, it’s about where we’ve been in the last few years. So this is basically saying where both China and the United States would like to think, ‘Get things back on track on agricultural trade.’”
China’s Silence Raises Questions
One source of skepticism in commodity markets is that China has not publicly acknowledged the $17 billion figure promoted by the White House. But Basse says that is not unusual when dealing with Chinese trade negotiations.
“It’s not typical, but it’s not uncommon with China,” Basse says. “If you think backwards maybe to October, when we did the last soybean deal, they didn’t acknowledge the 12 million metric tons and finally did, but they never really did acknowledge the Dabu Chan agreement, which is 25 million metric ton purchases by the end of a calendar year.”
Basse says Beijing often avoids publicly confirming major purchase commitments because doing so can reduce its leverage in future negotiations.
“If you’re China and you’re having to make these purchases, acknowledging it just kind of runs the table against yourself,” Basse says. “So it’s not unusual and not uncommon. I do not look for China to announce this.”
Still, Basse says there are clear signals the market can watch for to determine whether the agreement becomes meaningful.
“Though we’d like to see a drop in tariff levels from China — that 10% on beans and 15% on corn and wheat — that will be the first indication that the deal is real and we’re going to see the private buyers back buying United States grains,” Basse says.
Doud: “No Doubt. We Have a Deal.”
Doud says he believes the framework itself is already settled.
“No doubt. We have a deal,” Doud says. “There’s no question about that. It’s just a matter of how long it’s going to take.”
According to Doud, one important development is the creation of a more regular communication process between the two countries, including discussions about a “board of trade” concept that would allow both sides to review progress and address disputes on a recurring basis.
“This board of trade concept is really interesting to me,” Doud says. “This is a new element to our relationship and trade between the United States and China of saying, ‘Look, we need to engage on a very regular, maybe monthly basis, to see how these things are going.’”
Doud says maintaining regular communication is critical after several years of strained relations and limited engagement between the two governments.
“We went four years here without any conversation,” Doud says. “And if you do that with any of your customers, you don’t talk to them for four years, things are going to get a little loose and slippery, and we’ve got to get everything back on track. That’s what this discussion was all about.”
Beef and Poultry Could Benefit Quickly
Beyond grain markets, the agreement is already reopening doors for U.S. meat exports.
China recently granted five-year registration extensions to 425 U.S. beef plants and approved additional export facilities after more than a year of delays.
Basse says the biggest gains may actually come from poultry exports rather than high-value beef cuts.
“China’s an offal buyer,” Basse says. “They buy the organ meat, if you will, things that Americans don’t like to eat. I don’t think they’re buying the middle meats or the high-end steaks. So with that, it will be helpful, and that will help packer margins to some degree.”
But Basse says poultry exports could create even stronger opportunities.
“I’m really excited about the poultry side of things,” Basse says. “We’re getting back to selling things like chicken feet to China and some other things. So poultry actually excites me a little more than beef. And I think it’ll keep the old protein train moving, if you will, to the upside for many of these meat products looking forward.”
Dairy Demand Continues to Surge
While grain and meat markets wait for more certainty from China, the dairy industry is already benefiting from strong global demand.
Doud says U.S. dairy production and exports have both accelerated sharply this year.
“Our first quarter of this year, milk production in the United States is up 3.2%,” Doud says. “Our exports are up 7% in the first quarter. Our cheese exports are up 23%, and our butterfat exports are almost double.”
He says competitive pricing and changing consumer trends are helping drive stronger domestic and international demand.
“One of the things we’re noticing here is the yogurt sales so far in the last several months have just been through the roof,” Doud says. “So [it’s a] really, really good time to be in the dairy business.”
Doud also points to increased interest in protein-rich foods and products connected to GLP-1 weight-loss medications.
“When you have the GLP-1 conversation, that’s a hot topic of conversation, you’ve got to have more protein in your diet,” Doud says. “The clean labels, the healthy side of the equation, making America healthy again — this all leans itself toward more dairy.”
The Deal May Only Be the Beginning
For now, both men agree the U.S. and China have reestablished a framework for agricultural trade. But markets remain cautious because traders want evidence, not simply announcements.
Until tariffs begin falling, export sales increase and purchase commitments appear consistently in government reports, uncertainty will continue to hang over commodity markets.
The framework may already exist, but market analysts and industry leaders say the real test is whether China follows through.