China Puts U.S. Soy Buying on Hold as Tariff War Escalates
Category: Trade
(Bloomberg) – China, the world’s largest soybean buyer, has put purchases of American supplies on hold after the trade war between Washington and Beijing escalated, according to people familiar with the matter.
State-grain buyers haven’t received any further orders to continue with the so-called goodwill buying and don’t expect that to happen given the lack of agreement in trade negotiations, said the people, who asked not to be named because the information is private. Still, China currently has no plans to cancel previous purchases of American soybeans, the people said.
President Donald Trump escalated his trade war with China earlier this month, ramping up tariffs on about $200 billion of Chinese goods, prompting Beijing to retaliate with further duties of its own. Trump and his counterpart Xi Jinping are expected to meet again at the end of June for the G-20 summit, when some analysts predict a potential resolution.
Soybean futures in Chicago slumped to a 10-year low earlier this month as the tensions peaked. Since then, prices have rebounded as a deluge of rain roils U.S. plantings.
Government data indicates China bought about 13 million metric tons of American soybeans after the countries agreed to a truce in December, in a move that showed goodwill toward getting the trade dispute resolved. While U.S. Agriculture Secretary Sonny Perdue said in February that China had pledged to buy an additional 10 million tons of American soy, purchases have now stopped.
USDA data also showed that China is yet to take delivery of about 7 million tons of U.S. soybeans that it has committed to buy in the current marketing year.
Spokesmen for state-run buyers Cofco and Sinograin didn’t have any immediate comment.
There are signs China is replacing U.S. soybeans with Brazilian supplies. The premium paid for soybeans loading at Paranagua port more than doubled over the past month as the pace of exports has accelerated in the past weeks.
“Brazil will supply China almost exclusively from now on,” said Pedro Dejneka, a partner at Chicago-based MD Commodities.
China is also grappling to contain a deadly swine disease outbreak in its hog herd, curbing demand for livestock feed. Soybeans are a key component of the rations, and Rabobank estimates about 30% of the nation’s pork supply has been lost.
