As Trade War Drags, China Scoops Up South American Soy for 2020

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As confusion about the possibility of a trade deal between Washington and Beijing reigns, Chinese soybean buyers are taking no chances and are turning to U.S. rivals in South America to secure supplies for next year.

The top importer of the commodity, used to make cooking oil and animal feed, has already started buying soybeans from South American for next year, according to people familiar with the matter. While China started purchasing a few cargoes just over a month ago, buyers last week stepped up interest for February and March shipments, said the people, who asked not to be named as the negotiations are private.

China buying from South America isn’t new -- producers in Brazil and neighboring countries have been the Asian nation’s main suppliers during the trade war. But locking in purchases this far in advance is a sign that Chinese consumers may be securing themselves against an even more protracted dispute with the U.S.

The move comes amid conflicting signs on what the actual chances are for a resolution. While Donald Trump said Monday the prospects for a deal with China are better now than at any time since negotiations began last year, a top state-media editor in Beijing questioned his version of events. That followed an escalation of the trade war on Friday, in which Trump raised tariffs to be imposed on China just hours after the Asian nation announced retaliatory duties.

Chinese firms are also taking advantage of cheaper prices in South America for next year’s crop. While Brazilian soybeans for loading in September are trading at a premium of almost $1.50 a bushel over futures in Chicago, supplies for March are only at a 40-cent premium, according to data from brokerage Ary Oleofar.

Despite increasing South American purchases, China has no current plans to cancel U.S. cargoes that it’s already purchased, according to the people. U.S. government data indicates China bought about 14 million metric tons of soybeans in the current season, with just over 2 million tons still to be shipped.

--With assistance from Kevin Varley and Niu Shuping.

To contact the reporter on this story: Isis Almeida in Chicago at ialmeida3@bloomberg.net

To contact the editors responsible for this story: Tina Davis at tinadavis@bloomberg.net, Millie Munshi, Patrick McKiernan

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