New Delhi — Global soybean market will keep a close watch for any positive sign in the upcoming deputy-level US-China trade talks, scheduled to be held in Washington today, trade sources said.
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Washington meeting is seen as a prelude to the high-level early October trade talks between Trump and Xi administrations, represented by US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin, and China's Vice Premier Liu He.
Ahead of the upcoming talks, as a goodwill gesture, China bought 720,000 mt of US-origin soybeans early this week, according to the US Department of Agriculture daily sales report.
However, since Wednesday, soybean trading activity has been relatively quiet as the Chinese buyers are waiting for some positive development from the upcoming Washington talks, a trading source said.
Since July of last year, US-China trade tensions have escalated, with both sides levying multiple retaliatory tariffs on each other. Despite several rounds of talks since December, an agreement could not be reached.
As the US-China trade dispute lingers on, Beijing has looked to South America to replenish its huge soybean demand, sources said.
Before China slapped a retaliatory tariff on US soybeans in July last year, China bought 29.6 million mt of US-origin soybeans, accounting for 55% of total US exports over July 2017 to June 2018.
Over July 2018 to June 2019, China's imports of US beans fell 77% year on year to 6.7 million mt.
US-China trade relations hit a new low when both sides announced yet another round of retaliatory tariffs in August. While the Trump administration has been accusing China of not buying enough US agricultural products as promised, Beijing has charged the US with bullying during talks.
The US is the world's second-largest soybean exporter, behind Brazil. Both nations combined, account for over 80% of global soybean sales.
As the US soybean farmers confront plummeting soybean sales and prices, the Chinese buyers may experience supply-side constraint in the fourth quarter as South American soy inventory depletes, a trade source said. In the coming months, China may have to turn back to the US soy farmers, who are sitting on very high level of soy inventory.
US soybean stocks are estimated at 29.13 million mt at the end of August, which is the end of 2018-2019 marketing year, up 144% year on year, the USDA said in its monthly report.
China is world's biggest soybean importer, with an average yearly purchase of 88 million-90 million mt, accounting for over 60% of global soy purchases.
--Asim Anand, firstname.lastname@example.org
--Edited by Kshitiz Goliya, email@example.com