By Naveen Thukral and Ella Cao
SINGAPORE/BEIJING, Feb 5 (Reuters) – Chinese soybean importers face much higher costs to bring in an additional 8 million metric tons of U.S. cargoes, whose purchase President Donald Trump has said Beijing is weighing, as rival Brazilian supplies are far cheaper in their peak export season.
Still, 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, traders and analysts said.
“Is there a market logic at the moment for China procuring a bunch more U.S. soybeans, just as Brazil’s harvest comes in? No,” said Even Rogers Pay, director at Beijing-based consultancy Trivium China.
“But could it smooth the path for an even more productive and lucrative state visit by Trump in April? Perhaps.”
Benchmark Chicago soybeans traded near a two-month high on Thursday, underpinned by the expectations of Chinese demand.
China is considering buying 20 million metric tons of U.S. soybeans in the current season, Trump said after talks on Wednesday with President Xi Jinping that he described as “very positive”.
China’s commerce ministry did not immediately respond to a request for comment.
China’s state-run Sinograin and COFCO have already bought about 12 million tons of U.S. soybeans since October trade talks with the United States, paying close to $100 million more than they would for Brazilian beans, based on market prices.
WIDENING PRICE GAP
Rising prices of U.S. 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.
U.S. soybeans for April shipment were quoted at $2.08 to$2.48 a bushel over the Chicago Board of Trade (CBOT) May soybean contract, including cost and freight to China, versus Brazilian shipments at premiums of $1.18 to $1.33 a bushel.
“The spread between Brazilian and U.S. is around $50 per ton on FoB basis,” said a Singapore trader. “It doesn’t make commercial sense.”
At those levels, China would pay up to $400 million more for eight million tons of U.S. 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% on U.S. soybeans, versus one of 3% on Brazilian cargoes.
Private Chinese crushers have not bought a single cargo of U.S. soybeans in the season that began in September, preferring to turn instead to Brazil and Argentina, traders said.
Crush margins in China’s main processing hub of Rizhao have been negative since August.
Since December, Sinograin has held four auctions, selling about 2 million tons of imported soybeans from reserves to free up space for arriving U.S. shipments.
Traders said they expect more auctions after this month’s Lunar New Year holiday.
(Reporting by Naveen Thukral in Singapore and Ella Cao in Beijing;Editing by Tony Munroe and Clarence Fernandez)
Comments