There Are Signs China Soy Buyers Are Already Reacting to Tariffs

(Bloomberg) -- There are still more than two weeks before China imposes tariffs on imports on U.S. soybeans, but already there are signs of a shift in buying behavior.

There’s higher demand for shipments of Brazilian soy for delivery in August, September and even October, said Steve Cachia, a director at the Brazilian brokerage Cerealpar. That’s significant because international buyers usually make most of their South American purchases in the first half of the year, when Brazil is harvesting its soybean crop.

But with the 25 percent tariffs on American soybeans due to go into effect July 6, Chinese importers are focusing more than usual on Brazil, according to Pedro Dejneka, partner at Chicago-based MD Commodities.

"Brazil will probably export high volumes to China through October," Dejneka said in a telephone interview, "After that, Brazilian supplies will be low and China will be forced to return to the U.S. market."

Brazil may ship more than 5 million metric tons to China monthly through October, though that pace will be slower than the May peak of around 9 million, he said.

Brazil reaped a record 118 million tons of soybeans in the 2017-18 season, according to state agricultural company Conab. Shipments should reach as much as 76 million tons, Dejneka said. Brazil exported 68.2 million tons in the previous season, according to Conab.

The higher demand for Brazil’s soybeans has spurred premiums paid at domestic ports to the highest since April. On Wednesday, importers payed a premium of $1.565 a bushel over Chicago futures to buy soybeans for loading in September at the port of Paranagua. The measure has risen 57 percent this month, according to data from Commodity 3.

To contact the reporter on this story: Tatiana Freitas in São Paulo at tfreitas4@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Patrick McKiernan

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