US soy exporters struggle with huge China export commitments in midst of trade war

06-Jun-2019 Intellasia | Reuters | 6:00 AM Print This Post

US soybean exporters are facing what may be their busiest and most logistically challenging summer due to an unprecedented backlog of soybeans purchased by China that still needs to be shipped and widespread floods in the US Midwest.

While there is little hope for a prompt US-China trade deal, some 7 million tonnes of US soybeans bought before talks broke down last month will need to be delivered to Beijing in coming months, US exporters and industry analysts said.

China would face steep penalties if it tried to cancel the orders and, as the world’s top soy importer, it still needs the soybeans, traders said. Cancellations of deals made during trade talks earlier this year could also escalate diplomatic tensions.

“You have a contractual obligation so you’re going to need a mutually agreed-upon cancellation price or it would be considered default,” said a US-based soy exporter who asked not to be named.

Cancellation costs would vary from seller to seller and could range from hundreds of thousands to millions of dollars per cargo, depending on how cheaply and easily the exporter can exit grain hedges and freight commitments made when the initial purchase was made.


Category: China

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