China approves tariff free US soybeans purchases

According to Bloomberg, China has authorized five of its companies to buy US soybeans without tariff: state-owned Jiusan Group, Shandong Bohi Industry Co, privately held China Sea (Zhonghai) Oil Industry Co, Yihai Kerry Group (Chinese subsidiary of Singapore-based Wilmar International Ltd) and Hopefull Grain & Oil Group.

The companies will be able to buy up to 3m tons of soybeans from the United States, which was interpreted as a gesture of goodwill towards the US. There may also be a second round of imports depending on how trade negotiations progress.

China’s US soybean imports plummeted to near zero late last year after China adopted a 25% soybean tariff.

The decision to authorize the purchase of soy without tariff was made after a meeting between the Chinese government and buyers of the commodity last week in Beijing.

In addition, US President Donald Trump had complained that China had not increased its purchases of US agricultural products, a promise he said was made by Xi Jinping at the G20 summit in Osaka last month.

The world’s largest soybeans consumer, China, reduced imports from Brazil by 13% to 20.07m tons in the first four months of 2019, from 23.08m tons shipped in the same period last year, according to Cargonave shipping agency. The Asian country’s share of Brazil’s soy exports fell to 72.8% in the period, compared to 77.6% in the same period of 2018, despite China imposing tariff on US soybeans.

The African swine flu, which has wiped out many of China’s pigs, is one of the reasons for the downturn, as soybeans are the main raw material for making pig feed.

US trade representatives are expected to visit China next week. Trade talks between the two countries – which have been waging a tariff war for more than a year and have not been talking since May – are expected to advance.

The following DataLiner graph shows Brazil’s soybean export trends to China from January 2015 to May 2019:

Source: Bloomberg

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