CHICAGO/BEIJING (Reuters) - Chinese importers have been busy booking fresh purchases of soybeans from Brazil this week, despite the White House announcement that China had agreed to buy up to $50 billion (38.6 billion pounds) of U.S. farm products annually during trade talks last week.
The purchases from Brazil, rather than the United States, show that Chinese buying has been driven more by price than policy since last week’s preliminary trade agreement that U.S. President Donald Trump hopes will be signed next month.
Anticipation that Chinese buyers would return to the U.S. market to make big purchases in the wake of the deal drove benchmark U.S. soy prices Sv1 last Friday to their highest levels since the start of the trade war more than 15 months ago.
The rally in U.S. prices last week, however, made Brazilian soy more of a bargain for Chinese buyers. Brazilian soy is even more appealing to commercial importers because a 25% duty on U.S. shipments remains in effect and Beijing has not awarded the non-state-owned firms any new tariff waivers.
Since Monday, two traders said, China has booked at least eight boatloads, or 480,000 tonnes worth $173 million, of Brazilian soybeans. While Brazil is China’s largest soybean supplier, large purchases from South America are unusual at this time of year with the U.S. harvest coming in.
Benchmark U.S. prices Sv1 posted their first weekly decline in three weeks as Chinese buying failed to materialise in the U.S. market.
Trump said on Twitter on Sunday that China has already begun making U.S. agricultural purchases. But three U.S. soybean exporters said there have been no U.S. sales to China since last week’s talks in Washington, and none have been confirmed by the U.S. Department of Agriculture.
“I’ve not had any inquiries at all for U.S. (shipments),” said one of the U.S. soybean exporters. “There were a few November boats bought from Brazil and several new-crop South American boats for March forward but nothing here.”
Another U.S. exporter said a drop in Brazilian soybean prices sparked fresh demand from commercial soy importers that have been unable to profitably import American soybeans for more than a year unless given tariff waivers.
State-owned firms COFCO and Sinograin, which are exempt from the 25% retaliatory duties on U.S. imports, have “little appetite” to buy unless U.S. prices drop further, the second U.S. exporter said.
White House economic adviser Larry Kudlow acknowledged on Thursday that China’s “serious commitment” to buy up to $50 billion of agricultural products would depend in part on market conditions.
Before the trade war, China imported most of its U.S. soy between October and January, turning to South America around February.
