Importers snap up cheap US soybeans as China stops buying

14-Jul-2018 Intellasia | Reuters | 6:02 AM Print This Post

CHICAGO (Reuters)China’s retaliatory tariffs on US soybeans, threatened for weeks and enacted Friday, have driven down prices and triggered a wave of bargain shopping by importers in other countries stocking up on cheap US supplies, according to a Reuters analysis of government data.

Chinese buyers have so far this year accounted for just 17 percent of all advanced purchases of the fall US soybean harvestdown from an average of 60 percent over the past decade, the analysis found. They are instead loading up on Brazilian soybeans, which now sell at a premium of up to $1.50 a bushel as US soybean futures have fallen 17 percent over six weeks to about $8.50, their lowest level in nearly a decade.

The price gap has sparked a run on US soybeans by importers from Mexico to Pakistan to Thailand, according to the analysis of US Agriculture Department data.

Even as China has retreated, all importers’ advanced purchases of the next US soybean crop shot up 127 percent through June, at 8 million tonnes, compared to the same period last year, the analysis showed.

The purchases are the latest example of how politics are upending billions of dollars in global trade flows as US President Donald Trump fights a trade war with China.

Beijing imposed tariffs on $34 billion worth of US products on Friday, from soybeans and cotton to automobiles and airplanes, in retaliation for US tariffs enacted the same day on Chinese goods of equal value.

The decline of China’s purchases of US soybeans and the jump in those from other countries amount to a collective bet against any swift resolution of the escalating trade war between the world’s top two economies.

Even Brazil, the world’s top soybean exporter, is prepping for major purchases of US soybeans to feed its domestic processors as it diverts more of its own crops to China at premium prices, according to exporters association Anec. Brazil may import up to 1 million tonnes of US soybeans, with purchases likely ramping up in October, said Anec representative Lucas Trindade.

Brazilian soy bean processors, which turn the crop into cooking oil and animal feed, normally have no need for US soybeans. But soon it may be cheaper for them to import beans grown thousands of miles away in the US Midwest than to buy local crops.

“It seems irrational, but there is a possibility if prices in Chicago (futures) approach the $8 level,” said Alessandro Reis, head of origination and logistics at CJ Selecta, a soy processor and trading firm in Brazil.

Grains merchants who dominate the soybean marketsincluding Archer Daniels Midland Co, Bunge Ltd and Cargill Inc [CARG.UL]are working to minimise the impact of the sudden drop in Chinese demand by diverting cargoes elsewhere. Bunge Ltd and ADM declined to comment. Cargill did not respond to requests for comment. Representatives of the US Soybean Export Council have been meeting with buyers in Asia and Europe to encourage them to buy US soy, said Jim Sutter, CEO of the US Soybean Export Council. The moves are part of a broader effort launched this spring to raise demand for soy in countries such as Indonesia that normally buy from Brazil. “With the recent price declines that we’ve seenwowsoybeans in general are on sale,” Sutter said. “Buyers around the world ought to be stocking up.”

The advanced purchases data include buyers who did not disclose their identity or location, which at 3.9 million tonnes are about 1 million tonnes above normal. Even if all those purchases came from Chinese buyers, the nation’s total share of the advanced crop purchases would be its lowest in 13 years, the Reuters analysis shows.


Category: China

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