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Chinese buyers still keen on Brazilian soybeans despite delays in imposition of US tariffs

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Buyers on wait-and-watch mode despite delay in tariff imposition

New Delhi — The Chinese consumers are still looking to Brazil for soybean purchases, despite the recent import tariff postponement by the US, sources said Wednesday.

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The United States Trade Representative, or USTR, announced Tuesday that the additional 10% import tariffs on certain Chinese goods will be delayed till December 15 instead of September 1 as originally scheduled.

Although the tariff postponement has been viewed as a goodwill gesture from the US, it had little impact on Chinese soybean buyers.

"I don't see any reason for China to buy US soybeans in response to this move. There is still over three million mt of soybean purchases [from the US] that haven't been shipped [to China]," Darin Friedrichs, senior Asia commodity analyst, INTL FCStone told S&P Global Platts Wednesday.

Since the trade dispute started last year, share of US-origin soybean in Chinese market had dropped to 8% during July 2018-March 2019 period, from 34% a year earlier. In the same period, Brazil's market share jumped to over 85% in China's soybean imports, from 55%, according to the data by General Administration of Customs China.

Despite, several rounds of US-China trade talks since last December, the basic issues have not been resolved, sources said.

"This (postponement of tariff) is not really a very clear sign for both sides to cease fire," a trader said. "We have seen many similar rounds of tit-for-tat recently," he added.

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Since yesterday, as US tariff delay news came, Chinese soybean market has been on a wait-and-watch mode and the buyers are not actively asking for US soy offers, traders said. Domestic market is cautious about purchasing any US product at this point of time. According to the sources, Chinese buyers might still purchase Brazilian soybeans in the short run to cover the September demand.

"As for now, the crushers will still buy Brazilian soybeans for September shipment," a trader told Platts. Crushers are unlikely to wait until late August to cover September demand, considering the fact that they still have some uncovered August demand that have been carried forward, he added.

Meanwhile, Brazilian soybeans prices remain firm amid strong demand from China. A trade was reported at 222 c/bu over November (X) CBOT Tuesday, CFR China.

"September basis for Brazilian soybeans is still high, as sellers are confident of strong Chinese demand," a trader said.

Crush margins in China recovered earlier this week, which motivated the local buyers to pick up the buying activities. However, as Dalian Commodity Exchange (DCE) soymeal slumped in the morning, crush margin has been hurt again.

Current Crush Margin in Chinese domestic market at Asian close was around Yuan 10/mt ($1.4/mt), down 80% week on week, for October Brazilian shipment.

"The Dalian (DCE) soy meal market is weaker [than last week], however I think it's a short-term reaction," Darin said. "I don't see the recent news (tariff delay) is dramatically changing the soybean supply and demand situation in China," he added.

-- Ivy Li, newsdesk@spglobal.com

-- Jessie Li, newsdesk@spglobal.com

-- Asim Anand, newsdesk@spglobal.com

-- Rohan Somwanshi, newsdesk@spglobal.com

-- Edited by Debiprasad Nayak, newsdesk@spglobal.com