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China Shuns U.S. Soybeans Amid Trade War, Turns to Brazil
USAgNet - 09/28/2018

China's soybean processors are snapping up Brazilian cargoes for shipment in the fourth quarter, curbing purchases of U.S. crops for delivery in North America’s peak marketing season as the trade war between Washington and Beijing intensifies. That shift away from U.S. beans by China, which takes more than 60 percent of the commodity traded worldwide, will pile further pressure on benchmark Chicago Board of Trade prices after they plumbed 10-year lows last week.

According to Reuters, China in July imposed a retaliatory 25-percent import duty on U.S. soybeans as part of the tit-for-tat trade dispute between the world’s top two economies, conflict that gathered steam this week with the introduction of fresh tariffs on other products.

“Chinese buyers are snatching soybeans from Brazil’s domestic oilseed market,” said a Singapore-based trader at an international trading company that runs oilseed processing plants in China.

“They are willing to pay a higher prices for Brazilian beans than what domestic crushers are paying,” he added, declining to be identified as he was not authorized to speak with media.

Brazil’s soybean export season typically ends in August-September after which cargoes from the United States take over the market until March. The South American nation is the world’s top exporter, while the United States is No. 2.

But Chinese importers have this year booked around 12 to 14 million tonnes of Brazilian beans for October-November arrival, according to the trader and an analyst in China. That comes as increases in storage capacity and improved logistics have allowed Brazil to extend its selling season.

Soybeans are crushed to make cooking oil and soymeal, a protein-rich animal feed ingredient. The landed cost of U.S. beans in China is currently similar to Brazilian soybeans even with the 25-percent tariff, but Chinese crushers are reluctant to take U.S. supply as they fear authorities may not approve cargoes, reports Reuters.

“The government’s signal on this is clear - do not buy U.S. beans,” said a senior analyst with a major futures brokerage in China.

“Basically, all shipments for the fourth quarter are from Brazil even though prices of Brazilian beans are very high.”

Premiums for Brazilian beans have shot to a record $2.50 a bushel over the November CBOT contract, which was trading at $8.51-1/4 a bushel at 0655 GMT on Wednesday. That compares with zero premium for freshly harvested U.S. soybeans.

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