Chinese importers' purchase of between two and three cargoes of U.S. soybeans on Monday has helped quell concerns that the two countries might be rekindling their trade war, but the uncertainty of the situation continues to plague buyers and sellers.
Shortly after President Donald Trump lashed out at China on Friday, reports surfaced that Chinese importers were paying a premium to purchase Brazilian soybeans. Concern quickly mounted that the Chinese purchases could be at the direction of the government, but so far there appears to be no concrete evidence of that.
U.S. government and industry officials tell Agri-Pulse there has been no confirmation from Beijing that China is retaliating by ordering the purchase of Brazilian soybeans.
Still, Chinese importers did last week buy 8-10 cargoes of more expensive Brazilian soybeans for September-October delivery as U.S.-China tensions heated up, and analysts saw that as a direct snub to the U.S.
U.S. government officials downplayed the significance of the purchases, stressing that when China begins buying for October-November, it will be mostly U.S. origin.
And on top of that, USDA reported Tuesday sales of 132,000 metric tons of U.S. soybeans to China for delivery in the 2020-21 marketing year.
That’s a really good sign, U.S. Soybean Export Council CEO Jim Sutter told Agri-Pulse in an interview Tuesday, but he also expressed concern about the recent friction between the U.S. and China.
Jim Sutter, USSEC
“It’s a very confusing situation,” he said. “What’s really concerning to me is the continued uncertainty that we put in the marketplace, which is not good for our U.S. soybean farmers and our U.S. soybean industry. We don’t want to be an uncertain supplier to a large world buyer.”
If Chinese importers are shifting towards more expensive Brazilian soybeans, it’s out of fear of having U.S. origin purchases on the books during a resumption of the trade war.
“These (Chinese) companies – they don’t want to get caught up in trade wars. They’ve got crushing plants to run, so they want to buy beans that they know they can actually ship and take delivery of.”
China began in March to offer exemptions to some of its trade war tariffs for importers of soybeans and many other commodities. Those exemptions are widely the reason China has already purchased hundreds of thousands of U.S. soybeans in recent weeks, and they will be key as trade is expected to ramp up over the coming months.
But it appears that U.S.-China ties will also continue to be tested in the coming months. Trump, in reaction to a Chinese push to crack down on Hong Kong freedoms, announced plans on Friday to begin investigating Chinese companies, blocking entrance to the U.S. for some Chinese students and ending preferential trade treatment for Hong Kong. But ties were already fraying over U.S. criticism of the way China handled the COVID-19 outbreak.
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On Friday, Trump said "China's cover-up" of the virus allowed it "to spread all over the world, instigating a global pandemic that has cost more than 100,000 American lives and over a million lives worldwide.”
And the impacts on trade still aren’t clear.
“We’ve been working for 40 years in China to develop a long-term relationship with importers and stakeholders,” Sutter said. “We want to get back to working on that long-term relationship. … Unfortunately, with all this uncertainty, it makes it extremely transactional and the opposite sort of relationship than we want to have.”
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