For Bold Chinese Buyers of Soybeans, Bargain U.S. Prices Trump Trade War

September 21st, 2018


Category: Oilseeds

(Reuters) – At least two cargoes of U.S. soybeans are heading for China as some buyers are willing to risk taking up historically cheap U.S. beans even amid worries that Beijing may take further steps to deter imports amid mounting trade tensions with Washington.

Grain traffic from the United States to China has nearly ground to a halt since Beijing hit $50 billion in U.S. imports, including soybeans, with hefty tariffs, in retaliation for a similar move by Washington.

Still, bulk carrier Ultra Panther was due to arrive in southern China on Friday, while the Elsa S will land in the port of Qingdao, Shandong province, on Sept. 26, according to Thomson Reuters Eikon shipping data.

The buyers of the beans, which are used to make meal for animal feed and oil for cooking, are not known, and the cargoes may have been booked before the tariffs were introduced.

But the shipments have drawn attention among traders who say they are steering clear of the U.S. market because of the risk of further curbs on U.S. soybeans.

“Whoever is buying the cargoes is really bold. We wouldn’t dare buy from the U.S. now,” said a trader with a state-owned company.

Some traders worry Chinese customs may slow the clearance of any U.S. purchases by ramping up inspections, as happened with pork, fruit and log shipments earlier this year.

Soybeans have taken center stage in the prolonged dispute over trade between the world’s top two economies, with Beijing targeting goods produced in states like Iowa that voted for U.S. President Donald Trump in the 2016 election.

The oilseed, grown in Iowa and Nebraska, was the biggest U.S. agricultural export to China last year worth $12.7 billion.

“Who has the guts to import U.S. soybeans? The political risk is too high,” said an importer.

“We would never dare to take the lead,” said the importer.

The incentive is huge, however, as export prices on a free-on-board basis from the U.S. Gulf have plunged 30 percent since April to decade lows around $316 per ton, while Brazilian export prices have rallied as Chinese buyers seek alternative sources.

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