LDN - Business

China seeks to roll July U.S. soybean cargoes to August: sources

[June 13, 2019] By Hallie Gu and Karl Plume

BEIJING/CHICAGO (Reuters) - Chinese soybean buyers are asking sellers in the United States to delay cargoes due to be shipped in July until August, two sources familiar with the matter said, raising fears of cancellations like ones that roiled the market last year.

The contract renegotiations come as the world's top two economies remain locked in a protracted trade war that prompted China to sharply cut purchases of the oilseed from its No. 2 supplier starting from the middle of last year.

Soybean imports from the United States virtually dried up in the second half of 2018, before Beijing agreed to buy nearly 14 million tonnes from American farmers over December to March during a temporary truce in the trade spat.

More than 6 million of those tonnes have already been shipped to China, but some 7 million tonnes bought before talks broke down in May still need to be delivered.

Beijing's state-owned companies are trying to roll about 2 million tonnes of July cargoes into August, said a source with direct knowledge of the matter.

"It isn't a washout yet. But it is strange that (the state firms) suddenly wanted to delay all July shipments by a month now," the source said.

A U.S. export broker confirmed that he had been approached by Chinese buyers to delay cargoes he sold them, and that he was working with them to execute the request.

The two sources declined to be named as they are not authorized to speak to the media.

Sinograin, which manages China's soybean reserves, did not respond to a fax seeking comment on the issue. Top state grains trader COFCO Corp did not reply to an email to its media department.

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Soybeans sit in a truck as they are loaded at the Ruff Brothers Grain elevator in Leonore, Illinois, U.S., July 6, 2018. REUTERS/Daniel Acker/File Photo

Delaying shipments could exacerbate problems that U.S. exporters are already facing, with an unprecedented backlog of soybeans still to be shipped as widespread flooding in the U.S. Midwest challenges logistics.

A third source, a trader with an international trading company based in Beijing, said he doubted whether all the U.S. sellers would be willing to delay the shipments.

Rolling over to August is not a huge concern, said the sources, but any further delay after that would be problematic, with the U.S. new-crop harvest due in September set to swell stocks and push down prices.

China would incur steep penalties if it tried to cancel the orders, and it still needs the soybeans, traders have said.

Beijing might be trying to buy more time with the delay, one of the sources said, giving it the option to still cancel cargoes if its trade talks with Washington do not go well.

U.S. president Donald Trump said on Wednesday he still expects to meet Chinese President Xi Jinping at the G20 summit in Japan late this month, but he also threatened to increase tariffs on Chinese goods if Beijing does not reverse its stance on structural reforms.

Beijing recently decided to stockpile the remaining U.S. soybean cargoes waiting to be shipped, rather than crush them for immediate sale as a feed ingredient.

(Reporting by Hallie Gu in BEIJING, and Karl Plume in CHICAGO; Additional reporting by Dominique Patton; Editing by Tom Hogue)

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