Chinese companies who’ve committed to buying soybeans from the U.S. through the year ending on August 31st are likely to cancel those shipments once the extra tariff on U.S. imports kicks in on Friday. As the world’s top soybean buyer, China has yet to take delivery of about 1.14 million metric tons of U.S. soybeans booked for the current marketing year.
USDA reported that China recently resold 123,000 tons of committed deliveries to Bangladesh and Iran. A Bloomberg article calls soybeans a key “flash-point” in the worsening trade relations between the U.S. and China after officials in Beijing said they would levy tariffs on imports starting on July 6th in response to more duties imposed by the Trump Administration.
There will be a few shipments that get through because shipments with products intended for state reserves are tariff-free. However, a Shanghai investment manager tells Bloomberg that most of the other shipments will be canceled after the tariffs go into effect because the rate will be too high and crushers will lose money.
China has already begun to contract for a higher number of shipments for soybeans from Brazil. Supplies are currently high but projected to run out in the fourth quarter of this year if China doesn’t take any U.S. soybeans.