China state-owned crusher buys more costly US beans to meet trade pledge

The state-owned Chinese crusher Cofco was heard buying another three cargoes of US soybeans Wednesday overnight, despite higher prices than Brazilian beans, as the Chinese government pushes to meet the $40 billion purchase pledge under US-China Phase One agreement.

Three more cargoes of US soybeans out of the US Gulf were heard traded for shipment between August and September this year, several market sources close to the matter told Agricensus.

So far, between 8-11 cargoes of US beans have been bought by China out of the Gulf this week, despite Brazilian soybeans remaining cheaper for shipments until September this year.

“The country gave it a task,” one China-based trade sources told Agricensus, pointing out the purchases of US soybeans at higher-than-Brazil prices could be politically driven.

Both Cofco and Sinograin were heard checking prices for US soybeans out of USG and PNW Wednesday overnight.

Soybean traders were sceptical about whether China could meet the buying target of $40 billion worth of US agricultural goods under the Phase One deal of which soybean makes up a large part.

But Brazilian beans were offered cheaper for nearly all of the first three quarters of 2020.

Cash premiums on CFR China basis for Brazilian soybeans plummeted following the demand shift in the past two days, as private crushers in China were stalled in Brazil after state-backed purchases of US beans began.

August shipments of Brazilian beans were heard traded at 153-154 c/bu over July futures Wednesday overnight, down about 10-12 c/bu from the day before.

“I didn’t expect Brazil CNF [China] would be this weak. There is no such hurry to sell,” one soybean trader said, adding that farmer selling in Brazil has been abundant given a weak local currency.

Two other soybean traders also described the sharp fall in Brazilian premiums as “surprising”.