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China is ditching expensive Brazilian soybeans for US supplies

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Traders are washing out Brazilian purchases made earlier in the year as the price gap to American supplies widened.

[HONG KONG] China, the world's top soybean buyer, is ditching expensive Brazilian purchases and replacing previously done deals with American supplies, according to people familiar with the transactions.

Traders are washing out Brazilian purchases made earlier in the year as the price gap to American supplies widened, said the people, who asked not to be identified because the information is private. Some traders have struck the arrangements to supply their own operations in China, while others are doing them on behalf of Chinese clients, the people said.

Brazilian soybean prices have surged as supplies dried up. At the same time, the American harvest is just around the corner and traders are expecting a bumper crop. Analysts surveyed by Bloomberg forecast yields will be the highest since 2016 when the US Department of Agriculture releases its closely-watched monthly report on Wednesday.

The price gap between the two countries has boosted American purchases. The US Department of Agriculture on Monday reported almost 600,000 metric tons of soybeans sold to China in trades that took place at the end of last week. On Monday, people familiar with the matter said American shippers sold at least another six cargoes to China. A typical cargo holds 55,000 to 60,000 tons.

The move could help China accelerate progress toward meeting its pledges under the phase-one trade deal with the US ahead of an Aug. 15 meeting between Washington and Beijing. In the first half of the year, the US shipped about US$7.3 billion in agricultural goods to China, only 20 per cent of the US$36.5 billion goal, USDA data showed.

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