China Expected To Cancel Nearly All Remaining Soybean Contracts For This Year

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The amount being cancelled? 1.14 million metric tons.

The bulk of American soybean shipments destined for China will be canceled after Friday’s next tariff goes into effect, according to Bloomberg News, and China is unlikely to make further purchases between now and August 31, which ends the market year.

China is the world’s top soybean buyer and has yet to take delivery of about 1.14 million metric tons of U.S. soybeans booked for the current marketing year, according to U.S. Department of Agriculture data. The USDA reported last week that China had resold some 123,000 tons of committed deliveries to Bangladesh and Iran.

Bloomberg noted that soybeans have taken a central role in the U.S.-China trade dispute, as China retaliates against President Donald Trump’s tariffs by targeting products from states that offer him the greatest support.

“These shipments will be either canceled or resold if extra tariffs are imposed,” said Gao Yanbin, an investment manager with agriculture investment firm Shanghai Shenkai Investment Co. “The tariff rate is too high which will make crushers lose money.”

Chinese companies likely will have no option but to buy from U.S. producers beginning this fall, however, as production in Brazil – which has become China’s go-to seller – will slow in the fourth quarter.

“There will be a supply deficit from the fourth quarter as crushers won’t have enough supplies if they don’t take U.S. soybeans,” Gao said. Brazilian supplies fall to seasonal lows in the first and fourth quarters -- a period when China’s imports are normally dominated by the U.S. The CNGOIC expects Chinese companies may need to import at least 10 million tons from the U.S. when South American supplies run down.

“If China intends to keep their crushing plant operating in the fourth quarter and early first quarter they will need to import U.S. soybeans even with a 25 percent tariff,” as there are no other options to cover the shortage, said Paul Burke, North Asia regional director with the U.S. Soybean Export Council. China imported about 25 million tons from the U.S. in the fourth quarter of 2017 and the first quarter of 2018, according to customs data.

Bloomberg reported that according to Jiang Boheng, an analyst with Luzheng Futures Co., this will give China the “world’s most expensive soybeans,” raising domestic prices of soybean meal and oil.

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