(Bloomberg) -- Chinese buyers are loading up on Brazilian soybeans from the coming harvest, taking advantage of attractive prices in a move that will also help safeguard supply, at a time when concerns about worsening trade tensions with the US are running high.
The South American nation is expected to collect its biggest-ever crop, making supplies abundant and helping Chinese traders lock in good margins. Active purchases of Brazilian beans mean at least half of Chinese demand for February-April has now been covered, as well as about 20% for May to June, according to estimates from traders who asked not to be identified.
Traders normally book cargoes about two months ahead, but can lock in shipments further out when margins prove strong enough. Free-on-board prices for Brazilian cargoes are about $2 per ton below those from the US Gulf for February and $22 cheaper for March, Commodity3 data shows.
Chinese crushers are also taking the unusual step of securing some Brazilian cargoes for December and January delivery, during the pricier off-season before their next crop is collected, traders said. That period is typically when the US dominates the global market, following its own harvest.
While Brazil is already the world’s top exporter, the latest purchases highlight China’s heightened reliance on the nation’s soy. Worries about a potential supply shock if US farm products get tangled in another trade war after President-elect Donald Trump takes office early next year are adding to the incentive to stock up elsewhere.
Extra Tariffs
Trump said on Monday that he plans to impose additional 10% tariffs on goods from China. He has previously pledged to hike tariffs to 60% for all products from the Asian nation, raising the risk that farm goods could be caught in retaliatory measures.
Traders aren’t fully avoiding American supply, and the US has about 4 million tons of outstanding soybean sales for China in the 2024-25 season, government data show. Still, that’s the lowest for this time since 2018 — during Trump’s first term.
Buyers are cautious over worries about higher tariffs, Chinese consultancy Mysteel Global said in a report last week.
China is forecast to import about 109 million tons of soybeans in the current season. Its overall crop demand, including grain, has faltered as the country grapples with a deepening economic crisis.
On the Wire
President-elect Donald Trump vowed additional tariffs on China as well as US neighbors Canada and Mexico, roiling markets with his first specific threat to curb global trade flows since his election win.
The European Union is proposing to sanction several Chinese firms that it claims helped Russian companies develop attack drones that were deployed in Ukraine. The EU is also looking into imposing restrictions on additional Russian oil tankers.
China’s activity pulled back in the first half of November after reaching its highest level in a year in the prior two weeks, according to Bloomberg Economics. The decline in China’s industrial profits likely widened in the 10 months through October on deeper producer price deflation and softer production, BE said.
The Week’s Diary
(All times Beijing unless noted.)
Tuesday, Nov. 26:
- Nothing major scheduled
Wednesday, Nov. 27:
- China’s industrial profits for October, 09:30
- CCTD’s weekly online briefing on Chinese coal, 15:00
Thursday, Nov. 28:
- Nothing major scheduled
Friday, Nov. 29:
- China’s weekly iron ore port stockpiles
- Shanghai exchange weekly commodities inventory, ~15:00
Saturday, Nov. 30:
- China’s official PMIs for November, 09:30
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