Brazil exports to slow as China media confirms US soybean tax exemption

Chinese state media said Friday that the government has exempted some US soybeans and pork from paying additional import taxes that were triggered by the US-China trade war.

Without divulging quantities, Xinhua said Friday that the government “will support relevant enterprises buying certain amounts of soybean, pork and other agricultural products from today in accordance with market principles and WTO rules.”

AgriCensus reported Thursday that the government had told five privately-owned crushers that they would exempt punitive taxes of 30% that had arisen because of the trade war on up to 5 million mt of imports.

At least 400,000 mt had been purchased in the first two hours of trade on Thursday, with newswires reporting figures of up to 1 million mt on the day.

Market sources told Agricensus that the prices paid were in the range of 135-140 c/bu over futures contracts for Q4 shipment CFR North China from the Pacific Northwest.

“This shall hit Brazilian premiums in case true, said Frederico Humberg, CEO of Brazilian trading house Agribrasil.

PNW prices jump, Brazil slides 

Offers for soybeans ex-PNW jumped 25 c/bu on Thursday following the news to 90 c/bu over futures, which works out at $362/mt compared with $347/mt on Wednesday.

Conversely, bids for Brazilian Paper Paranagua soybeans, which had been over 100 c/bu over futures a few days ago, stood at 75 c/bu at time of press.

“Hard to say where it is gonna trade... Old crop premiums are collapsing,” one second trader from an international trading house said.

With FOB Santos levels pegged 5 c/bu above Paranagua values, on a flat price basis Brazilian beans stand at $363/mt against PNW levels up to $362/mt. 

When factoring in nominal freight levels of $29/mt and $42/mt and adjusting for a $7/mt of protein premium in Brazilian beans, US beans are now clearly the more competitive option for Chinese crushers - a dynamic that is likely to pressure Brazilian beans further or stymy exports for the rest of the year.

“China is back buying US, so you can forget about Brazil for 2019,” a Brazilian broker told Agricensus Thursday.

“Definitely the outlook does not look too friendly for Brazil,” said one soybean trader from a major trading house in Brazil.

Brazilian exports are expected to reach 70-72 million mt in the 2018/19 marketing year, down around 12-14 million mt on the year.