China’s Soy Buying Spree May Signal Prudence Before U.S. Talks

© Reuters.  China’s Soy Buying Spree May Signal Prudence Before U.S. Talks© Reuters. China’s Soy Buying Spree May Prudence Before U.S. Talks

(Bloomberg) — Chinese firms have been snapping up U.S. this week, but don’t mistake this as a sign of buyer confidence in upcoming talks.

The companies, which received a fresh 2 million-ton quota from Beijing to import American beans free of retaliatory tariffs, have been seeking soy every day so far. That’s likely because they want to rush through orders in case the talks fail and imports are halted, said Darin Friedrichs, a senior analyst at INTL FCStone’s commodities division.

“The Chinese soybean purchases are a necessity and may be a sign that the crushers want to get these grades in quickly because things could change on talks,” Friedrichs said.

The wariness of commodity is perhaps understandable given the whipsawing in between Donald Trump and counterpart Xi Jinping over the past year. Chinese firms were issued tariff waivers in July as Beijing offered Washington an olive branch, only to see shipments stopped about a month later after talks fell apart. Top negotiators from the two countries are expected to meet in Washington on Oct. 10.

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The purchases may also be because it makes financial sense right now. Margins on crushing U.S. soybeans in China are higher than those of rival Brazil thanks to the lower of American soy when retaliatory tariffs are removed.

Chinese state-owned and private firms bought at least 6 cargoes of U.S. soy, equivalent to about 400,000 tons, said people familiar with the purchases, asking not to be identified because the information is private. That’s on top of 12 to 15 cargoes, or 1 million tons, purchased earlier this week.

No one answered calls to China’s commerce ministry during the National Day holiday, and a fax seeking comment wasn’t immediately responded to.

November soybean futures were little changed at $9.13 a bushel by 4:11 p.m. time. Prices have gained 3.4% so far this week.

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