Brazil soy premiums surge to $1/bu as China buys big

Premiums for Brazilian beans over Chicago physical futures rocketed around 10-15 cents per bushel on Friday on a spate of Chinese buying, according to three brokers.

Brazilian beans, traded in the paper Paranagua partials market, surged to 102 cents over May futures for May loading amid reports that China bought up to 10 cargoes on Thursday.

Cargo offers had disappeared from the market on Friday, but the paper values, which typically trade at a discount to cargoes, equate to $413/mt FOB and $447/mt CNF China with freight of $34/mt.

In comparison, US cargoes were being offered for May loading at 74 cents over May futures, equating to $403/mt FOB and $445/mt CNF China.

"[Chinese] buyers are preferring to load in Brazil instead of the US. There could be many reasons for that... but the one that is being talked about is [the potential of an] import tax," said one market observer.

Sources from both a US-based brokerage and a Brazil brokerage agreed that there was a growing trend to buy Brazilian and speculated it was related to the US China trade spat.

Earlier in the day, Reuters reported that some Chinese buyers were seeking clauses in their contracts allowing them to cancel cargoes in the event of the imposition of an import tax.

But while Brazilian premiums surged on Friday, futures fell to almost their lowest level in six weeks as speculators placed bets that China would tax soybeans in retaliation for US proposed taxes on technology products.

However, a weaker dollar had helped futures recover later in the day to $10.22/bu.