China's Tariffs on U.S. Soybeans Are Boosting Processor Profits

(Bloomberg) -- Here’s an unexpected twist to the China-U.S. trade drama: proposed tariffs on U.S. soybeans are boosting profits for oilseed processors.

While China’s plans to impose 25 percent tariffs on U.S. soybeans are dragging futures lower, crusher margins jumped as much as 19 percent on Wednesday to the highest since November 2014. One reason for the move: soybean meal was left off Beijing’s $50 billion hit list of targeted American goods. The protein is made by crushing the oilseed.

China’s livestock-feed producers could start importing soy meal, instead of the usual beans, to satisfy the country’s hogs -- a boon to processors like Bunge Ltd. and Archer-Daniels-Midland Co. Shares of both companies rose more than 1 percent on Wednesday.

China is the world’s biggest soybean buyer, and the tariffs on U.S. imports could mean the Asian country turns to South America for shipments. But once Brazilian supplies are exhausted, the country could look into purchasing more meal instead. Argentina, the world’s biggest meal exporter, is suffering production problems amid a prolonged drought, further boosting the prospects for U.S. crushers.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Millie Munshi, Steven Frank

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