Philippine Daily Inquirer

US-CHINA TRADE WAR TRIGGERS BARGAIN COMMODITY SHOPPING

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CHICAGO— China’s retaliator­y tariffs on US soybeans have driven down prices and triggered a wave of bargain shopping by importers in other countries stocking up on cheap US 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 US soybean harvest down from an average of 60 percent over the past decade, the analysis found.

Bargain prices

They are instead loading up on Brazilian soybeans, which now sell at a premium of up to $1.50 a bushel as US 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 US soybeans by importers from Mexico to Pakistan to Thailand, according to the analysis of US agricultur­e department data.

Even as China has retreated, all importers’ advanced purchases of the next US soybean crop shot up 27 percent through June, at 8 million tonnes, compared to the same period last year, the analysis showed.

Global fund flow

The purchases are the latest example of how politics are upending billions of dollars in global trade flows as US President Donald Trump fights a trade war with China.

Beijing imposed tariffs on $34 billion worth of US 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.

No truce seen

The decline of China’s purchases of US 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 US 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 tons of US soybeans, with purchases likely ramping up in October, said Anec representa­tive Lucas Trindade said.

Brazilian soy bean processors, which turn the crop into cooking oil and animal feed, normally have no need for US soybeans.

Soybean stockpiles

But soon it may be cheaper for them to import beans grown thousands of miles away in the US 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 CJ Selecta, a soy processor and trading firm in Brazil.

Grains merchants who dominate the soybean markets are working to minimize the impact of the sudden drop in Chinese demand by diverting cargoes elsewhere.—

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