ANALYSIS: Is Trump trade talk already hurting US bean sellers?

14 Mar 2018 | Andy Allan

It’s a busy time to be a seller of Brazilian soybeans.

Exports for the first three months of this year are expected to be at least 16.5 million mt – 22% higher than the first three months of 2017, largely driven by a sustained buying spree from China.

While at the same time the bulk of the nation’s record harvest is expected to hit the ports at a time when futures prices and premiums are at multi-month highs.

Despite such prices, at least 13 cargoes have been sold out of Brazil in the past few days for April and May loading, leaving some sources to speculate that Chinese buyers are snubbing the US due to trade fears.

Last week the American Soybean Association said that its members had heard directly that soybean may be a “prime target” for tariffs after the US said it would tax steel and aluminium imports and Chinese solar panels and washing machines.

“There are two things that are going on here. Number one the Chinese are fearful they might get an import tariff on US origin and secondly the PNW is running out of elevation,” said Charlie Sernatinger, a broker with ED&F Man, referring to the west coast ports in the Pacific Northwest.

“There is no question in my mind that this (trade war talk) is having an impact,” he said.

A second source agreed, claiming Chinese buyers were “snubbing the US”.

But while few sources doubt whether Brazil is taking market share from the US, some claim the rush to buy Brazil cargoes is due to a multitude of reasons with fears of tariffs just one of several factors.

Kelly Herrick, a risk management consultant with Advanced Trading in the US, said the rush for Brazilian beans was down to a “perfect storm of events” that included a willingness to pay for higher protein levels evident in Brazilian beans and the fact the US has tougher sanctions for breaching foreign matter limits.

“You have the trade war risk, the dockage discount issue, the PNW logistics with corn owning that space now and plus the biggest thing is the quality,” he said.

The US is struggling with logistics at both southeast and west coast ports with FOB prices surging in Portland, Oregon due to a lack of capacity and prices rallying in the Gulf due to logistical issues involving demurrage.

That, alongside a poor Argentinian crop, has pushed up the whole soybean complex and forced China to pay higher prices.

But while there may be a feeling that China is snubbing the US, that necessarily isn’t borne out by the data.

According to USDA data, outstanding sales commitments to China from this year’s crop were around 7 million mt behind the same point last year when Trump placed taxes on Chinese solar panels and washing machines in late January.

Since then, that gap rose to 7.8 million mt, as US sellers struggled to sell beans to China.

However, the latest data shows that situation has reversed with US sellers posting outstanding sales commitments of 27.7 million mt by March 1, just 6.65 million mt behind the previous year and the smallest weekly gap since November.

However, that doesn’t include sales to unknown destinations.

So, is the latest Brazil buying spree that saw China buy 40 cargoes in just a week in early March related to the trade spat?

“Not sure,” said one seasoned observer, adding that China’s buying may have already been done in any case.

Regardless, US net sales figures to China will be closely watched by the market for any impact.

The latest US net sales are due to be published Thursday.