US to slap warning stickers on China soybean cargoes in bid to cut delays

The US government has agreed to inspect soybean shipments destined for China and identify those that do not meet China's new threshold for foreign matter, according to a statement by the USDA, in a move that traders say may mean the US losing market share to Brazil.

The USDA’s Animal Plant Health and Inspection Service (APHIS) has agreed to inspect cargoes and label them should they not meet new Chinese foreign matter thresholds of 1%.

Typical specifications for cargoes are 2% maximum foreign matter.

In return, China’s Inspection and Quarantine Bureau said it will expedite inspections of cargoes that the US has said meets the 1% limit, but will not reject shipments should they be over that threshold.

“Shipments with more than 1% foreign material will carry an additional declaration on the phytosanitary certificate stating as such and China may subject these shipments to more inspection, cleaning or treatment at destination,” according to a statement from the APHIS.

“China may also require importers to have a compliance agreement to manage phytosanitary risk (while) China will expedite agricultural clearance of US soybean shipments that have 1% or less foreign material,” it said.

China, which imports around two-thirds of all traded soybeans, has since September complained to US inspectorate officials regarding excessive contamination in US shipments of soybeans.

As a result, China has increased its inspections on delivery of most cargoes – a move that has resulted in shipments being delayed at Chinese ports.

However, an agreement between the two inspectorates was reached following a meeting in early December and the new regime will come into force on January 1, 2018, USDA sources said.

Help

APHIS said it had agreed to what it called a “systems approach” to help companies achieve the threshold.

That includes helping farmers implement “weed seed control” best practices, USDA sampling and analysing cargoes for weed seed in bulk and container shipments, and finally labelling shipments should they exceed 1% with a note that states: “This consignment exceeds 1% foreign matter.”

However, one trader warned cargoes without the label may fetch a premium and those with it be penalised in terms of price: “I don’t see how there won’t be a price differential.”

A second trader added: “I am kind of surprised the board hasn’t reacted a little more to the chatter on it. Quality premiums in wheat are usually bearish board direction.”

Irked

The plan has reportedly irked at least one larger trader.

Chinese media outlets as well as market sources claimed agribusiness giant Archer Daniel Midland (ADM) had urged APHIS to reject the agreement, which effectively reduces the foreign matter quality from 2% currently to under 1%.

ADM did not respond to a request for comment and a spokesperson for the APHIS declined to comment.

The US is the world's second largest exporter of soybeans after Brazil.

Earlier this month, Agricensus reported that Russia's government threatened to ban Brazilian imports of soybeans unless Brazil's agriculture ministry took action to improve contamination rates.

China has not requested additional checks from Brazil, according to sources.