China Grants New Tariff Waivers For US Soybean Purchases

Chicago Board of Trade soybean futures have been rising for the past 14 days, a total of +6.64%, on reports, China is granting new waivers to several domestic state and private companies to purchase U.S. soybeans without being subject to tariffs, according to Bloomberg. The companies received waivers for between 2 million to 3 million tons, sources told Bloomberg. Collectively, these firms bought 20 cargoes, or about 1.2 million ton of the soybeans from the U.S. Pacific Northwest on Monday. 

It depends on the news source to the exact quantity, Reuters is reporting that Chinese importers only bought 10 cargoes, or about 600,000 tons, expected to be shipped from Pacific Northwest export terminals from Oct. to Dec.

Bloomberg said state-owned buyers Cofco and Sinograin, as well as five other crushers, were awarded waivers this month to purchase U.S. soybeans. 

Sources said the waivers were granted after a meeting last week with working officials; purchases of agriculture products like soybeans are seen as kind gestures ahead of a trade meeting between U.S. and China next month. 

As shown below, soybeans have enjoyed a wave of buying over the past two weeks on expectations of a similar gesture of goodwill by China and positive trade war news flow. 

A trade deal appeared distant late last week after Chinese officials canceled a visit to the Central and Midwest states, but confirmed Monday that the cancellation was non-trade related. 

Monday's 10 to 20 cargoes, or 600,000 to 1.2 million tons of soybeans will leave Pacific Northwest terminals in the coming months. These are some of the most significant soybean purchases since Beijing raised import tariffs by 25% on U.S. soybeans last summer in retaliation for duties on other Chinese goods. 

Yet while China is repurchasing U.S. soybeans, Argentina's Agriculture minister confirmed Monday that China has "approved the first seven crushing plants in Argentina to begin exporting soymeal to the world's biggest consumer of the livestock feed," reported Reuters. 

Last month, we reported how China wants to build a grains 'superhighway' in the South American country by dredging the Parana River, it will allow large bulk vessels to transport soybeans from the Pampas farm belt to the South Atlantic to the Pacific, and ultimately to China. 

While the Trump administration celebrates China's latest agriculture purchases - keep in mind that China wants to become fully independent from the U.S., in terms of agriculture sourcing, which is why it's hedging itself with Argentina.