China advances soybean purchases from Brazil

Chinese importers are busy making new purchases of soy from Brazil this week, despite the White House announcement that China has agreed to buy up to US$50bn in US agricultural products annually during the trade negotiations that took place last week.

Two traders said China had ordered at least eight shipments, or 480,000 tons, worth US$173m, of Brazilian soybeans since October 14.

Although Brazil is the largest soybean supplier to China, large purchases of the Brazilian product are unusual at this time of year.

The following chart, based on Datamar’s DataLiner data, shows Brazilian soybean exports to China from January 2015 to August 2019:

Fonte: DataLiner/Datamar

Lack of US purchases so far shows that China is in no hurry to buy US products after phase 1 of the trade deal announced last week, which US President Donald Trump expects to be signed next month.

Last week Trump said on Twitter that China has already started making agricultural purchases in the US. However, three US soy exporters said there have been no US sales to China since last week’s Washington negotiations, and no Chinese purchases have been confirmed by the USDA.

“I didn’t have any polls about US [shipments],” said one of the exporters. “There were some boats for November bought in Brazil and several others from the new South American crop, but nothing here.”

Another US exporter said a fall in the value of Brazilian soybeans has spawned new demand from buyers who for more than a year have been unable to profitably import US produce unless they had tariff exemptions.

State-owned companies Cofco and Sinograin, which are exempt from 25% retaliatory taxes on US imports, have “little appetite” to buy unless US prices fall further, a second US exporter said.

Before the trade war, China imported most of its soybeans into the US between October and January and turned to South America around February.

Prices of US soybean loaded to China at the Gulf Coast terminals for November and December are now close to parity with Brazilian prices.

But when soybean values ​​from the two main suppliers are similar, Chinese importers tend to favor Brazilian grain because of its higher average protein content.

Chinese importer Hopefull Grain & Oil bought 10 shipments of Brazilian soybeans 15 days ago, before negotiations between the US and China, and at least three other cargoes last week, two commercial sources said.

Wilmar was also among the buyers, with about five to six shipments purchased from Brazil last week, according to one US exporter and two traders, one based in Beijing and one working in a Chinese trading company. Hopefull and Wilmar declined to comment.

It is believed that in recent waves of takeovers, companies have used their exemptions for duty-free US purchases, said one Chinese exporter and importer.

White House economic adviser Larry Kudlow acknowledged on Thursday (10/17) that China’s “serious commitment” to buying up to US$50bn in agricultural products would depend in part on business and market conditions.

Source: Reuters

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