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China Turns Back to Brazilian Beans After Trade War Escalation

Soybeans are loaded into a truck after being harvested at the Santa Cruz farm, near Atibaia, Brazil, on Wednesday, Mar. 29, 2017. Photographer: Patrícia Monteiro/Bloomberg

Bloomberg News, August 2, 2019

Chinese buyers are turning to Brazilian soybeans after another escalation of tensions between the U.S. and China.

Buyers from the Asian nation are bidding for Brazilian soy for shipment in August, September and October, according to people familiar with the matter who asked not to be identified because talks are private. China is seeking to buy from Brazil after President Donald Trump’s announcement Thursday on additional tariffs, a person with knowledge of the matter said.

For now, China’s state-owned companies don’t plan to cancel cargoes of previously-purchased U.S. soy or annul permits given to crushers to buy American oilseed without tariffs, people familiar with the matter said.

The prospect of China stepping up purchases has pushed up Brazilian prices. The premium for October at Paranagua port soared 11% Friday to 99c a bushel, data from Commodity 3 show.

While China usually buys Brazilian soy at this time of the year, buyers had bought some U.S. cargoes recently as goodwill ahead of trade talks. In the week ended July 25, China bought about 135,000 metric tons of American beans, about half of which were due to be shipped in the season ending Aug. 31, Department of Agriculture data showed Thursday. About 4.25 million tons of U.S. soybeans are scheduled to head China before the end of the month.

Brazilian supplies available for shipment are limited as domestic inventories are low, according to Ana Luiza Lodi, an analyst at INTL FCStone.

“Domestic consumption is strong amid higher demand for feed,” she said by telephone from Campinas, Sao Paulo. “If premiums at ports keep rising, we’ll see renewed speculation on the possibility of Brazil importing soybeans for local supplies to free its own production to export to China.”

— With assistance by Isis Almeida, Shuping Niu, Tatiana Freitas, Michael Hirtzer, and Dominic Carey

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