Beijing may instruct state-owned companies to buy expensive American soybeans to please Trump

Chinese soybean importers face significantly higher costs to import an additional 8 million tons of U.S. soybeans that U.S. President Donald Trump has said Beijing is considering buying. Brazilian soybeans are much cheaper during the peak export season, Reuters reported.

Still, Beijing could direct state grain companies to make purchases to appease Trump ahead of his planned visit to China in April, hoping to win other concessions from Washington, traders and analysts said.

“Is there any market logic now for China to buy significantly more U.S. soybeans just as the Brazilian crop is coming on the market? No. But could it pave the way for an even more productive and profitable state visit by Trump in April? Maybe,” said Ewen Rogers Pei, director of Beijing-based consultancy Trivium China.

Soybean futures in Chicago traded near a two-month high on Thursday on expectations of stronger demand from China.

Trump said China was considering buying 20 million tonnes of US soybeans this season after talks with Chinese President Xi Jinping on Wednesday that he called “very positive.”

State-owned companies Sinograin and COFCO have already bought about 12 million tonnes of US soybeans since October, after trade talks with the US began, paying almost $100 million more than they would have paid for Brazilian soybeans based on market prices.

The rise in US soybean prices has widened the gap with Brazilian cargoes, which would force Chinese buyers to pay significantly higher premiums than they have since November, traders said.

“The gap between Brazilian and US soybeans is about $50 a tonne on a free-on-board basis. “It doesn’t make commercial sense,” said a Singaporean trader.

At these levels, China could pay up to $400 million more for 8 million tonnes of US soybeans compared to Brazilian cargoes.

Even at equal prices, private processors are unlikely to buy US soybeans, as Beijing still imposes a 13% tariff on US soybeans compared to 3% on Brazilian cargoes.

Private Chinese processors have not bought a single cargo of US soybeans in the season that started in September, preferring Brazil and Argentina, traders said.

Tags: China, soybean, USA