China faces higher prices for further US soybean buys to please Trump
This can be to smooth the path for an even more productive and lucrative state visit by President Trump in April
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[SINGAPORE/BEIJING] Chinese soybean importers face much higher costs to bring in an additional eight million metric tons of US cargoes, whose purchase US President Donald Trump has said Beijing is weighing, as rival Brazilian supplies are far cheaper in their peak export season.
Traders and analysts said that Beijing could order purchases by state grain companies to please Trump ahead of his China visit planned for April, as it eyes other concessions from Washington.
Even Rogers Pay, director at Beijing-based consultancy Trivium China, said: “Is there a market logic at the moment for China procuring ... more US soybeans, just as Brazil’s harvest comes in? No.”
But could it smooth the path for an even more productive and lucrative state visit by Trump in April? Perhaps.”
The benchmark Chicago soybeans traded near a two-month high on Thursday (Feb 5), underpinned by the expectations of Chinese demand.
China is considering buying 20 million tonnes of US soybeans in the current season, Trump said after his talks on Wednesday with Chinese President Xi Jinping that he described as “very positive”.
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China’s commerce ministry did not immediately respond to a request for comment.
China’s state-run Sinograin and China Oil and Foodstuffs Corporation have already bought about 12 million tonnes of US soybeans, since the October trade talks with the US. They paid close to US$100 million more than they would for Brazilian beans, based on market prices.
Widening price gap
The rising prices of US soybeans have widened the gap with Brazilian cargoes, which would force Chinese buyers to shell out far higher premiums than they have paid since November, traders said.
The US soybeans for shipment in April were quoted at US$2.08 to US$2.48 a bushel over the Chicago Board of Trade May soybean contract, including cost and freight to China, versus Brazilian shipments at a cost of US$1.18 to US$1.33 a bushel.
“The spread between (Brazil) and US is around US$50 per tonne on a free-on-board basis,” said a Singapore trader. “It doesn’t make commercial sense.”
At those levels, China would pay up to US$400 million more for eight million tonnes of US soybeans than for Brazilian cargoes.
Private crushers unlikely to step in
Even with prices at par, private crushers would be unlikely to step in to buy, with Beijing still imposing a tariff of 13 per cent on US soybeans, versus one of 3 per cent on Brazilian cargoes.
Private Chinese crushers have not bought a single cargo of US soybeans in the season that began in September, preferring to turn instead to Brazil and Argentina, traders said.
The crush margins in China’s main processing hub of Rizhao have been negative since August.
Since December, Sinograin has held four auctions, selling about two million tonnes of imported soybeans from reserves to free up space for the arriving US shipments.
The traders said that they expect more auctions after February’s Chinese New Year holiday. REUTERS
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