China to cancel more US soy shipments as trade war worsens

CHINESE companies are expected to cancel most of the remaining soybeans they have committed to buy from the US in the year ending Aug 31 once the extra tariff on US imports takes effect from Friday.

China, the world’s top soybean buyer, has yet to take delivery of about 1.14 million metric tons of US soybeans booked for the current marketing year, according to US Department of Agriculture data. The USDA reported last week that China had resold some 123,000 tons of committed deliveries to Bangladesh and Iran.

Soybeans are a key flash point in the worsening trade relations between the US and China after Beijing said it would levy tariffs on imports starting July 6 in retaliation against a raft of duties imposed by the Trump administration. By focusing on US agricultural produce, as well as raw materials such as coal, China is targeting the rural communities in states that voted for Trump in 2016.

“These shipments will be either canceled or resold if extra tariffs are imposed,” said Gao Yanbin, an investment manager with agriculture investment firm Shanghai Shenkai Investment Co. “The tariff rate is too high which will make crushers lose money.”

Some cargoes will get through because shipments destined for state reserves are free from tariffs, Gao said. China holds unspecified volumes of state reserves of both domestic and imported soybeans. China had been forecast to buy 97 million tons of soybeans this marketing year. Analysts don’t expect many soy cargoes from the US to arrive after the July 6 deadline as buyers have already stopped shipments. The Peak Pegasus bulk carrier will arrive before the deadline while the Aeolian Fortune and Kea have already arrived, according to Monica Tu, an analyst with Shanghai JC Intelligence Co.

Chinese companies have contracted to increase purchases from Brazil since April and soy inventories at major crushers are currently at the highest in years, according to the China National Grain and Oils Information Centre. That’s likely to change later in the year.

“There will be a supply deficit from the fourth quarter as crushers won’t have enough supplies if they don’t take US soybeans,” Gao said. Brazilian supplies fall to seasonal lows in the first and fourth quarters – a period when China’s imports are normally dominated by the US. The CNGOIC expects Chinese companies may need to import at least 10 million tons from the US when South American supplies run down. — The Washington Post