Wed, Jul 04, 2018 - Page 10 News List

With new tariffs, China to stop more US soy orders

RETALIATION:A tit-for-tat response from Beijing on US tariffs could cause China to have the ‘world’s most expensive soybeans,’ a Luzheng Futures Co analyst said

Bloomberg

Chinese companies are expected to cancel most of the remaining soybeans that they have committed to buy from the US in the year ending Aug. 31, once the extra tariff on US imports takes effect from Friday.

China is the world’s top soybean buyer and has yet to take delivery of about 1.14 million tonnes of US soybeans booked for the current marketing year, US Department of Agriculture data showed.

The USDA last week said China had resold some 123,000 tonnes of committed deliveries to Bangladesh and Iran.

Soybeans are a key flashpoint in the worsening trade relations between the US and China after Beijing said that it would levy tariffs on imports starting on Friday in retaliation against a raft of duties imposed by US President Donald Trump’s administration.

By focusing on US agricultural produce, as well as raw materials such as coal, China is targeting the rural communities in states that voted for Trump in 2016.

“These shipments will be either canceled or resold if extra tariffs are imposed,” said Gao Yanbin, an investment manager with agriculture investment firm Shanghai Shenkai Investment Co (上海申凱投資). “The tariff rate is too high, which will make crushers lose money.”

Tariff-free cargoes destined for state reserves would get through, Gao said.

China holds unspecified volumes of state reserves of domestic and imported soybeans. China had been forecast to buy 97 million tonnes of soybeans this marketing year.

Analysts do not expect many soy cargoes from the US to arrive after the Friday deadline, as buyers have already stopped shipments.

The Peak Pegasus bulk carrier is to arrive before the deadline, while the Aeolian Fortune and the Kea have already arrived, Shanghai JC Intelligence Co (上海匯易諮詢) analyst Monica Tu said.

Chinese companies have since April contracted to increase purchases from Brazil and soy inventories at major crushers are currently at the highest in years, the China National Grain and Oils Information Center (CNGOIC) said.

That is likely to change later in the year.

“There will be a supply deficit from the fourth quarter as crushers won’t have enough supplies if they don’t take US soybeans,” Gao said.

Brazilian supplies fall to seasonal lows in the first and fourth quarters — a period when China’s imports are normally dominated by the US.

The CNGOIC said Chinese firms might need to import 10 million tonnes from the US when South American supplies run down.

“If China intends to keep their crushing plant operating in the fourth quarter and early in the first quarter, they will need to import US soybeans, even with a 25 percent tariff,” as there are no other options to cover the shortage, US Soybean Export Council North Asia regional director Paul Burke said.

China imported about 25 million tonnes from the US in the fourth quarter of last year and the first quarter of this year, customs data showed.

China would have the “world’s most expensive soybeans,” which might increase domestic prices of soybean meal and soybean oil, Luzheng Futures Co (魯證期貨) analyst Jiang Boheng said.

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