China is buying U.S. soybean cargoes ahead of Trump-Xi meeting, sources say

Ella Cao and Naveen Thukral

BEIJING/SINGAPORE (Reuters) – China’s state-owned COFCO has bought three cargoes of U.S. soybeans, two trade sources said, the country’s first purchases of this year’s U.S. crop, ahead of a summit between leaders Donald Trump and Xi Jinping.

As the two countries battle over trade tariffs, the lack of Chinese purchases has cost US farmers billions of dollars as they largely supported Trump in his presidential campaigns.

While COFCO’s agreement to ship about 180,000 metric tons of soybeans between December and January was China’s first such purchase in months, traders do not expect much recovery in demand for U.S. cargo after recent heavy purchases in South America.

COFCO did not immediately respond to Reuters’ request for comment.

“COFCO started buying US beans before the two leaders reached a trade deal,” said a trader at an international trading company that supplies Chinese chippers.

“The volumes ordered by COFCO are not that big, three cargoes so far.”

Benchmark Chicago soybean futures jumped to a 15-month high this week, retreating from five-year lows on expectations of a U.S.-China trade deal. Futures were mostly lower heading into Wednesday’s close as Chinese buying was seen as minimal and traders awaited further news from the Trump-Xi meeting.

A lack of demand from China has hurt US farmers financially this season, as they have almost finished harvesting a large crop and their biggest export market has been absent. They also face high fertilizer, seed, labor and equipment costs.

Illinois Gov. JB Pritzker signed an executive order Wednesday declaring an agricultural trade crisis in the nation’s top soybean-producing and exporting state, citing soybean production losses of $100 to $200 per acre. The order ordered state agencies to take immediate action to expand domestic markets and invest in mental health support for farm families

The main U.S. soybean export season usually runs from October to January, but China has avoided soybeans since the fall U.S. harvest this year because of protracted trade friction with Washington and is turning to South American suppliers.

Reuters first reported that China had purchased three cargoes.

LACKLUSTER FLOOR

China, which accounts for more than 60% of the world’s soybean imports, has almost finished booking cargoes from Brazil and Argentina through November, with limited purchases expected in December and January before the Brazilian harvest.

“U.S. suppliers missed most of the oilseed crushing business,” said a second oilseed trader, who expected China to need about 5 million tonnes in December and January. tons of shipments for which market conditions are favorable to Brazil.

U.S. soybeans, which have sold at a deep discount to Brazilian cargoes in recent weeks due to weaker demand in China, have rallied this week and are now about $2.45 a bushel above Chicago futures, traders said.

Private Chinese buyers tend to prefer Brazilian soybeans because of their higher protein content, which is generally superior to U.S. soybeans, said Jeffrey Xu, CEO of Shanghai-based OCI, a soybean consultant, and two other traders.

However, China could take about 8 million. tonnes of U.S. soybeans for its strategic reserves between December and May, traders said, buying through state-owned companies such as Sinograin, which would be worth about $4 billion.

(Reporting by Ella Cao and Naveen Thukral; Additional reporting by Karl Plume in Chicago; Editing by Tony Munroe, Clarence Fernandez and Deepa Babington)