A new China x USA chess match seems to be intensifying in recent days and now the market is speculating about the possibility that the Asian nation is already considering new purchases of soybeans in the North American market. According to information from the international news agency Bloomberg, Chinese government officials are in talks with state-owned and private companies to outline a possible plan to expand their acquisitions of the American oilseed.
The first information is that the volumes considered would be between 3.8 and 6 million tons for shipments in September. The Chinese Ministry of Commerce has not yet officially taken a position on the matter.
Sources familiar with the matter report that among the issues discussed in meetings that have been taking place since last Friday (19) – and which have promoted speculation in Chicago and increases of more than 20 points among commodity futures on the Chicago Stock Exchange – includes the possibility of suspending China's tariff on US soybeans, which currently stands at 25%.
Thus, what Beijing is now waiting for is a feed back from purchasing companies to effect yet another sign of “goodwill” with the Donald Trump government in the midst of a trade conflict that has been going on for more than a year and with the aim of moving forward with trade negotiations with the Americans. Since Trump and Xi Jinping met at the last G20 summit, at the end of June, in Japan, the conversations have evolved little or nothing.
At the center of the disagreements remain, mainly, issues linked to technology issues and the role of the Chinese telecommunications giant Huawei. And last week, the Chinese government denied the American president's statement about an agreement that had been signed at the G20 for the Asian nation to expand its purchases of agricultural products in the USA.
FIRST IN-PERSON MEETING AFTER THE G20
A US delegation, led by trade representative Robert Lighthizer and US Treasury Secretary Steve Mnuchin, is expected to travel to China next week and hold the first in-person meeting between leaders of the two nations since Xi and Trump's G20 meeting . Vice Premier Liu He, the president's right-hand man when it comes to the economy, is expected to lead the Asian nation's team.
According to the Chinese portal South China Morning Post, the meeting was arranged after the US signaled the possibility of exempting 110 products from China from import tariffs, including medical equipment and key electronic components in production, according to a source who preferred not to to identify. Likewise, and with a gesture of goodwill, Beijing would have signaled these purchases of more North American agricultural products.
Photo: IC
The meeting, if it actually happens, is considered by experts as another step in negotiations between the two largest economies in the world. Even so, they also believe that the conflict could still last for a considerable time and that the path to be taken towards an effective agreement is quite long. The meeting has not yet been officially confirmed by either side, although telephone conversations between representatives of the two countries were held last week.
“No matter how much uncertainty lies ahead of us, China will continue on its own path, do what it thinks is right, and strengthen its ability to deal with risks and challenges,” says the editorial on state news agency Xinhua.
EFFECTS FOR BRAZIL
In Brazil, the market also remains attentive to the impacts of these speculations and new movements on the formation of soybean prices. In principle, an agreement between China and the USA would put considerable pressure on prices here and would also result in less dependence on the Chinese in South America, as explained by Cerealpar and Culte consultant Steve Cachia.
However, this year is different and there are other factors that create a different scenario. “Our supply is limited by the shortage, and if China has nowhere to buy it would have to force prices up to guarantee product, and this would support us in the off-season.
Now, if there is an option in the USA – and there is a lot of supply there, with ample stocks and if we don’t have major losses in the American harvest –, the limit of the potential increase in Chicago would be limited”, he says.
Furthermore, if Chinese purchases in the USA were confirmed, there would be further pressure on Brazilian premiums. More than that, international freight rates at the highest levels in five years, according to the consultant, are another point of attention.
“The evolution of the conversations is not impressing me and time is passing. But yes, I don't doubt if political issues end up having even greater weight (than what we're seeing now). So far, China, one way or another, has taken over the soybean market without any major scares, perhaps helped by weaker demand due to African Swine Fever”, explains Cachia. “I think they will play hard. In addition to the desire to get things right, of course, this trade war soap opera is also starting to look like a tough game of geopolitics. And the 2020 American elections are getting closer and closer”, he adds.
Post: Marina Carvejani
Author: Carla Mendes
Source: Notícias Agrícolas
