China is buying up Brazilian soybeans in case of a trade war with the US

Chinese buyers are actively buying Brazilian soybeans for the upcoming crop, taking advantage of attractive prices. In this way, they hope to secure supplies in case of increased trade tensions with the United States

The South American country is expected to have the largest crop, which will help to increase supplies and provide Chinese traders with good margins. Active purchases of Brazilian soybeans have already helped cover at least half of Chinese demand for February-April and about 20 percent for May-June, according to traders who requested anonymity.

Traders typically book cargoes about two months in advance, but can lock in shipments for longer if margins are high enough. According to Commodity3, FOB prices for Brazilian shipments are about $2 per ton lower than those from the U.S. Gulf of Mexico for February and $22 cheaper for March.

Chinese refiners are also buying contracts for December and January delivery. Traders say this is the most expensive off-season period until the next harvest. The market is typically dominated by the U.S. harvest at this time.

Brazil is already the world’s biggest exporter, but the latest purchases underscore China’s growing reliance on soybeans from that country. Fears of a potential supply shock due to a possible trade war after President-elect Donald Trump takes office early next year are increasing the incentive to stockpile from other regions.

Additional tariffs

On Monday, Trump said he plans to impose additional tariffs on goods from China. He had previously promised to raise tariffs by up to 60% on all products from the Asian country, meaning agricultural goods could fall under retaliatory measures. Traders are not completely avoiding U.S. supplies, and the U.S. has about 4 million tons of soybeans sold but not yet delivered to China for the 2024-25 season, government data show. Still, that’s the lowest for this time since 2018, Trump’s first term.

Buyers are wary of higher tariffs, Chinese consultancy Mysteel Global said in a report last week. China is projected to import about 109 million tons of soybeans this season. Overall demand for crops, including grains, has weakened amid the deepening economic crisis.

Tags: China, Brazil, soybean, USA