China and US agree to curb trade war

Last week at the G20 summit, both Washington and Beijing agreed to ease up on import duties against each other, which have caused major disruptions to global commodity flows. The US agreed to put a hold on its plan to increase tariffs on US$200bn worth of Chinese goods. Meanwhile, China has agreed to buy a substantial amount of agricultural products amongst other things.  For this to occur, the US is expecting that China will cancel import tariffs on American commodities, as China’s 25% tariff on US soybeans make the commodity US$60 per ton more expensive than Brazilian soybeans. According to a source, China plans to buy 5-8m tons of soybeans from the US, with a further possibility of purchasing another 2m tons.

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vvhttps://www.hellenicshippingnews.com/china-traders-awaiting-lower-tariffs-before-buying-us-grain-again/

China traders awaiting lower tariffs before buying US grain again

China will need to drop steep tariffs it imposed on a range of American farm products earlier this year before it can fulfill its pledge to buy substantial volumes of U.S. goods, said Chinese traders.
China and the United States agreed on Saturday to a ceasefire in a months-long trade war that has roiled global markets and halted sales of U.S. soybeans to the world’s top buyer.
The United States agreed to put on hold a scheduled increase in tariffs on $200 billion of Chinese goods due to come into effect on Jan. 1, following talks between U.S. President Donald Trump and Chinese President Xi Jinping at a gathering of world leaders in Argentina.
The White House said Beijing had promised to buy an unspecified but “very substantial” amount of agricultural, energy, industrial and other products, with purchases of farm goods to start “immediately.”
But no substantial purchases can happen with a 25 percent duty still in place on U.S. soybeans, corn, sorghum and wheat, said buyers and analysts.
“How can you buy U.S. products if China does not reduce the tariffs? We haven’t made any move yet,” said a trader with a major Chinese trading house. He declined to be identified as he was not allowed to be quoted by media.
China’s tariffs on U.S. soybeans mean they are $60 per tonne more expensive than those from top global supplier Brazil, which is due to begin harvesting a record crop in a few weeks time.
Muted reaction in both the Chicago and Dalian futures markets on Monday underlined the lack of incentives for new purchases.
Chicago Board of Trade soybeans settled up about 1 percent while Dalian soymeal futures closed down less than 1.4 percent.
“The market isn’t impressed,” said Darin Friedrichs, Shanghai-based consultant at INTL FCStone.

REMOVING TARIFFS?
Some industry participants expected China to drop the tariffs soon after the Trump-Xi meeting.
“Tariffs on U.S. soybeans might drop as the two sides enter a honeymoon period. It is expected that they will start sending out goodwill signals,” said Tian Hao, senior analyst with First Futures.
China’s foreign ministry said on Monday that the two presidents had instructed their economic teams to work towards removing all tariffs.
“China has to do this, basically to get room to breathe,” said an executive at a state-owned trading house.
Until then, the only buyers likely to make purchases of pricey U.S. grain will be state-owned enterprises instructed by Beijing to buy soybeans for state reserves.
“If they have to buy something, then they can ask (state stockpiler) Sinograin to buy, the tariff is OK for reserves,” said another China-based trader with a global trading firm.
Time is running out for the United States to ship soy before Brazilian farmers start their harvest, U.S. analysts said.
“It takes time to get up and running again,” said Mike Steenhoek, executive director of the Iowa-based Soy Transportation Coalition.
Soybeans would need to be transported by rail from the interior Midwest to Pacific Northwest ports, where some export facilities may have already booked space for other grains, Steenhoek said. Shipment to China takes about three weeks.

“The window of doing bean business to China is getting really skinny, almost to the point where it is closed,” said Roy Huckabay, of Linn and Associates, a Chicago brokerage.

https://www.bloomberg.com/news/articles/2018-12-10/china-is-said-to-announce-resumption-in-u-s-soy-purchases-soon

China to Announce Resumption in U.S. Soy Purchases Soon

China intends to announce this month the first batch of U.S. soybean purchases where most, if not all, will be destined for state reserves, according to government officials.
The final decision will be made by the State Council or cabinet, said the people, who declined to be identified as the matter is confidential. Details to be decided include whether the volume should be 5 million tons or 8 million tons and if commercial companies should buy a further 2 million tons and be reimbursed for the 25 percent tariffs, the people said.

The decision comes just over a week after U.S. President Donald Trump and Chinese counterpart Xi Jinping pledged during the G20 meeting in Argentina to resolve the trade tensions that have disrupted global commodity flows. The resumption of U.S. soybean purchases will provide some relief to American farmers who have seen exports to the world’s biggest consumer plummet and domestic inventories pile up.
Read more: China State Firms May Buy U.S. Soy 1st, Top Researcher Says
Ministry of Finance officials led a meeting last week to discuss restarting American imports, the people said. It remains unclear whether the purchases will be made this month and if the shipments will be taxed first and reimbursed later, or if it will follow a cut in tariffs, they said. China’s commerce ministry and the finance ministry have not replied to faxes seeking comments.
Expectations of large U.S. soybean purchases have pressured domestic soybean meal prices, said Hou Xueling, analyst with Everbright Futures Co.
“For state reserves, the volume can be any number,” said Hou. “But not so for commercial buyers, as U.S. soybeans are not attractive while Brazil’s new crop gives good crush margins for plants.”
Soymeal contracts for May delivery on the Dalian Commodity Exchange closed at its lowest since June, 2017, on Monday. Soybean futures traded on the Chicago Board of Trade was down 0.5 percent at $9.12 per bushel.

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