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Uncertain times ahead for US soybean as Shanghai talks end: sources

The US soybean farmers might face uncertain times selling their soy stocks as the two-day Sino-US trade talks in Shanghai ended Wednesday without an agreement, sources said.

Both sides agreed to meet in September to initiate yet another round of trade negotiations, the first of which started last December.

“Even with high tariffs, China will continue to buy US agricultural products such as soybean, corn, and meat in small volumes,” Chinese agro-commodity consultancy JCI China said.

Any prospect of a successful trade deal took a hit Tuesday, when the US President Donald Trump accused China of not buying US agricultural products as promised.

In a series of tweets, he added that China always changed any deal in the end to its benefit.

The US-China trade talks restarted after Trump met his Chinese counterpart, Xi Jinping, on the sidelines of the G20 summit in Osaka,Japan, last month.

After the meeting, China agreed to buy more US-origin agricultural products, including soybeans.

However, on July 11, the US president complained that China was not buying US farm products.

“They have not been buying the agricultural products from our great farmers that they said they would,” Trump tweeted then. “Hopefully, they will start soon.”

Last week, the Chinese government, as a goodwill gesture before the Shanghai talks, approved five local soy crushing companies to buy around 3 million mt of US soybeans, without the retaliatory import tariffs, sources said.

The possibility of a trade deal at the Shanghai talks was very low, director of agro-consultancy ARC Mercosul, Matheus Pereira, saidearlier.

“Beijing is in no hurry to resolve the trade dispute with the Americans,” Matheus said. China may be waiting for the 2020 US presidential elections results, to move forward with any kind of resolution.

US is the world’s second-largest soybean exporter, behind Brazil. Both countries together accounted for over 80% of global soy salesin the 2017-18 season.

Before the trade dispute started last year, China used to be the biggest market for US soybeans, taking over 60% of US soy exports.

In July 2018, China imposed an additional 25% import tariff on US-origin soybeans in response to tariffs the US had placed on Chinese goods.

As a result, soybean shipments from the US to China fell 81% year on year to 5.4 million mt during July 2018-March 2019, according to the US Census Bureau, as Chinese buyers looked to South America for soybeans.

In June, the US’ share of Chinese soybean imports was 9% (614,805 mt), while the Brazil’s was over 84% (5.5 million mt), Chinese customs data showed.

The carryover stock for US soybean in 2018-19 marketing year (September-August) is estimated at over 28.56 million mt, more than double year on year, according to the latest US Department of Agriculture WASDE report.

Soybean imports from the US for rest of the year will be in small volumes and might depend on the domestic demand too, which is already reeling from the African swine fever outbreak, JCI China said.

Since last August, an outbreak of ASF in China has resulted in millions of pigs being culled, sources said.

Becoming a stopgap supplier to China, the world’s biggest soybean market, would be a devastating blow to the US soy farming sector, S&P Global Platts Analytics Senior Advisor Pete Meyer said.

China accounts for over 60% of global soybean purchases, with average imports of around 88 million-90 million mt a year.

Due to ASF, 2019 soybean imports by China are forecast to fall sharply, with Platts Analytics pegging it at 80 million mt, down 15% on the year.

China processes over 80% of its imported soybean into soy meal, which is then primarily used as animal feed for hogs and other livestock.

From this week, the US government is set to deploy $16 billion in assistance to farmers affected by trade disputes and unfavorable spring weather, according to the USDA.

The bailout payments include $14.5 billion in direct payments to producers of crops and meats, including soybeans, pork, and almonds, USDA said.

Last year, the Trump administration authorized similar farm assistance of $12 billion to farmers, including soybean growers, affected by trade disputes.

The farm aid might be a temporary solution, as US soybean farmers and traders are hoping for a quick resolution of the trade disputewith China, sources said.
Source: Platts

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