Japan and South Korea will continue to buy American wheat, but may change suppliers of soybeans and corn

Asian buyers are cutting back on purchases of U.S. farm products as Washington’s planned tariffs on China-bound vessels and sweeping import duties on key regional trading partners stoke uncertainty and dampen appetite for U.S. products, Reuters reported.

President Donald Trump’s plan to revive U.S. shipbuilding by levying up to $1.5 billion in port fees on China-bound vessels has forced exporters to seek out non-Chinese vessels, which has pushed up freight costs and reduced demand for U.S. farm products.

“That makes the U.S. an unattractive destination for more than half the world’s fleet,” said Jay O’Neill, a Kansas-based freight consultant.

Shipping issues and uncertainty over the trade war are likely to weigh on Chicago-based soybean and wheat futures, which are trading near multi-month lows, traders said.

“Most importers are not taking the risk of importing from the U.S. right now. Shipping costs have gone up and there is so much uncertainty about the trade war,” said a Singapore-based trader at an international company that sells U.S. grains and oilseeds to Asia.

Asia buys about 35% of the wheat and corn shipped worldwide. For soybeans, China accounts for more than 60% of the oilseeds sold worldwide.

While other Asian grain importers do not expect retaliation for the U.S. tariffs, limited vessel availability and trade war uncertainty are weighing on purchases, traders said.

Traditional U.S. wheat buyers such as Japan and South Korea are expected to continue buying U.S. cargoes, but they may buy corn and soybeans from alternative suppliers in South America and the Black Sea region.

“At the moment, purchases of U.S. products have virtually stopped. But looking ahead, we expect Japan and South Korea to continue buying U.S. wheat as they are obligated to buy from the U.S.,” said a second Singaporean trader.

Buyers such as Japan and South Korea find it difficult to switch from U.S. wheat as it is used for direct human consumption, but they may switch to alternative feed grain supplies such as corn and soybeans.

Most grain importers in Southeast Asia have yet to book about half of their May needs, said a second Singaporean trader, leaving them vulnerable to supply shortages.

Tags: South Korea, soybean, wheat, agricultural products, USA, Japan, corn