Importers snap up cheap U.S. soybeans as China stops
buying, by Karl Plume, 7/12/18.
CHICAGO (Reuters) - China’s retaliatory
tariffs on U.S. soybeans, threatened for weeks and enacted Friday, have driven
down prices and triggered a wave of bargain
shopping by importers in other countries
stocking up on cheap U.S. supplies, according to a Reuters analysis of
government data.
Chinese buyers have so far this year
accounted for just 17 percent of all advanced purchases of the fall U.S.
soybean harvest - down from an average of 60 percent over the past decade, the
analysis found. They are instead loading up on Brazilian soybeans, which now
sell at a premium of up to $1.50 a bushel as U.S. soybean futures have fallen
17 percent over six weeks to about $8.50, their lowest level in nearly a
decade.
The price gap has sparked a run on U.S.
soybeans by importers from Mexico to Pakistan to Thailand, according to the
analysis of U.S. Agriculture Department data.
Even as China has retreated, all
importers’ advanced purchases of the next U.S. soybean crop shot up 127 percent
through June, at 8 million tonnes, compared to the same period last year, the
analysis showed.
The purchases are the latest example of
how politics are upending billions of dollars in global trade flows as U.S.
President Donald Trump fights a trade war with China.
Beijing imposed tariffs on $34 billion
worth of U.S. products on Friday, from soybeans and cotton to automobiles and
airplanes, in retaliation for U.S. tariffs enacted the same day on Chinese
goods of equal value.
The decline of China’s purchases of U.S.
soybeans and the jump in those from other countries amount to a collective bet
against any swift resolution of the escalating trade war between the world’s
top two economies.
Even Brazil, the world’s top soybean
exporter, is prepping for major purchases of U.S. soybeans to feed its domestic
processors as it diverts more of its own crops to China at premium prices,
according to exporters association Anec. Brazil may import up to 1 million
tonnes of U.S. soybeans, with purchases likely ramping up in October, said Anec
representative Lucas Trindade.
Brazilian soy bean processors, which
turn the crop into cooking oil and animal feed, normally have no need for U.S.
soybeans. But soon it may be cheaper for them to import beans grown thousands
of miles away in the U.S. Midwest than to buy local crops.
“It seems irrational, but there is a
possibility if prices in Chicago (futures) approach the $8 level,” said
Alessandro Reis, head of origination and logistics at CJ Selecta, a soy
processor and trading firm in Brazil.
Grains merchants who dominate the
soybean markets - including Archer Daniels Midland Co, Bunge Ltd and Cargill
Inc [CARG.UL] - are working to minimize the impact of the sudden drop in
Chinese demand by diverting cargoes elsewhere. Bunge Ltd and ADM declined to
comment. Cargill did not respond to requests for comment.
Representatives of the U.S. Soybean Export
Council have been meeting with buyers in Asia and Europe to encourage them to
buy U.S. soy, said Jim Sutter, CEO of the U.S. Soybean Export Council. The
moves are part of a broader effort launched this spring to raise demand for soy
in countries such as Indonesia that normally buy from Brazil. “With the recent
price declines that we’ve seen - wow - soybeans in general are on sale,” Sutter
said. “Buyers around the world ought to be stocking up.”
The advanced purchases data include
buyers who did not disclose their identity or location, which at 3.9 million
tonnes are about 1 million tonnes above normal. Even if all those purchases
came from Chinese buyers, the nation’s total share of the advanced crop
purchases would be its lowest in 13 years, the Reuters analysis shows.
(For a graphic on China's falling share
of U.S. soybean purchases, see: tmsnrt.rs/2N2W5Q0 )
Norb Leahy, Dunwoody
GA Tea Party Leader
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