China to cancel US soy shipments as more tariffs loom

Bloomberg

Chinese companies are expected to cancel most of the remaining soybeans they have committed to buy from the US in the year ending on August 31 once the extra tariff on US imports takes effect from July 6.
China is the world’s top soybean buyer and has yet to take delivery of about 1.14 million metric tonnes of US soybeans booked for the current marketing year, according to US Department of Agriculture data. The USDA reported that China had resold some 123,000 tons of committed deliveries to Bangladesh and Iran.
Soybeans are a key flash-point in the worsening trade relations between the US and China after Beijing said it would levy tariffs on imports starting July 6 in retaliation against a raft of duties imposed by the Trump administration. By focussing on US agricultural produce, as well as raw materials such as coal, China is targeting the rural communities in states that voted for Trump in 2016.
“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.”
Some cargoes will get through because shipments destined for state reserves are free from tariffs, Gao said. China holds unspecified volumes of state reserves of both domestic and imported soybeans. China had been forecast to buy 97 million tonnes of soybeans this marketing year.
Analysts don’t expect many soy cargoes from the US to arrive after the July 6 deadline as buyers have already stopped shipments. The Peak Pegasus bulk carrier will arrive before the deadline while the Aeolian Fortune and Kea have already arrived, according to Monica Tu, an analyst with Shanghai JC Intelligence Co.
Chinese companies have contracted to increase purchases from Brazil since April and soy inventories at major crushers are currently at the highest in years, according to the China National Grain and Oils Information Center. That’s likely to change later in the year.
“There will be a supply deficit from the fourth quarter as crushers won’t have enough supplies if they don’t take US 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 US. The CNGOIC expects Chinese companies may need to import at least 10 million tons from the US 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 US 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 US Soybean Export Council. China imported about 25 million tons from the US in the fourth quarter of 2017 and the first quarter of 2018, according to customs data.
China will have the “world’s most expensive soybeans,” which may boost domestic prices of soybean meal and soybean oil, according to Jiang Boheng, an analyst with Luzheng Futures Co.
Premiums for Brazilian soybeans for August shipment were nearly 70 percent higher than that for US, according to the CNGOIC. They are at more than 300 cents a bushel over benchmark Chicago soy future prices arriving in China, according to the CNGOIC.

US, China should find a way out of
disputes, says billionaire Li Ka-shing
Bloomberg

Billionaire Li Ka-shing said a trade war between the US and China will hurt both the countries and urged the world’s two biggest economies to end the dispute soon.
“I certainly hope the two find a way,” Li told reporters after a university event on June 29 in southern China. “I certainly don’t want to see the trade war getting worse. Both countries are going to lose.” The spat will inflict pain on Hong Kong as well, he added.
Unless President Donald Trump backtracks, the US on July 6 will impose 25 percent tariffs on $34 billion of Chinese imports, with further levies on another $16 billion in imports under consideration.
China has threatened to impose countervailing duties the same day and vowed retaliation of “the same scale and intensity.”
The city’s richest man is the latest voice beseeching the two countries to step back from the brink as manufacturers globally warned consumers will suffer from rising costs due to the announced tariffs. General Motors Co. told the Trump administration that the tariffs could force it to cut jobs.
Li, 89, whose net worth is about $32 billion, has been the face of Hong Kong during an era when a handful of Chinese immigrants built large empires across Asia.