China may have to buy US soybeans anyway, says analyst

Hamburg — China may have to start buying US soybeans again in coming weeks, despite the trade war between the two countries, as other regions cannot supply enough soybeans to meet China’s needs, Hamburg-based oilseeds analysts Oil World said on Tuesday.

In July, China imposed import tariffs on a list of US goods, including soybeans, as part of the trade dispute with the country. China is the world’s largest soybean importer and has been seeking alternative supplies, especially in South America, where supplies available for export are down.

"China has to resume purchases of US soybeans," Oil World said in its latest newsletter. "The South American supply shortage will make it necessary for China, in our opinion, to import 15-million tonnes of US soybeans for October 2018 to March 2019, even if the current trade war is not resolved." Chinese purchases of US soybeans could restart "in coming weeks", Oil World added.

Soybeans, crushed to make cooking oil and the protein-rich, animal-feed ingredient soymeal, were the biggest US agriculture export to China last year at a value of $12.3bn, according to the US Department of Agriculture.

Oil World said with South American export supplies expected to be down sizeably from a year earlier in the next six months, China will face very tight domestic soybean supplies unless it resumes large-scale purchases from the US. "There is a risk that China will have to cut back its livestock production, implying higher prices on the domestic market," it said.

China is also likely to raise imports of processed soymeal as an alternative to soybeans for crushing, it said. Ironically this could mean China could still end up with US soybeans that have been processed in Argentina.

"The biggest increase is likely to be seen in soymeal exports from Argentina to China," Oil World said. "If China begins purchasing Argentinian soymeal, a lack of soybean supplies in Argentina is likely to raise that country’s imports of US soybeans."

Reuters