U.S. soybean exports scrapped as China shifts to Brazilian beans

CHICAGO (Reuters) - Orders for nearly 1 million tonnes of U.S. soybean exports were canceled this week, according to U.S. government data released on Friday, as cheap supplies from Brazil and trade tension with China made U.S. cargoes less attractive to buyers.

FILE PHOTO: Soybeans are sorted according to their weight and density on a gravity sorter machine in Fargo, North Dakota, U.S., December 6, 2017. REUTERS/Dan Koeck/File Photo

The U.S. Department of Agriculture did not detail which buyers canceled the cargoes in a daily announcement of large export deals. But China buys the lion’s share of U.S. soybean exports and trade sources said most of the shipments were likely headed there.

Officials from the United States and China are meeting to try to avert a damaging trade war between the world’s top two economies.

Trade tensions have roiled markets and shifted global commodity flows. Beijing on Friday dropped an anti-dumping probe on U.S. sorghum that had disrupted global trading of the feed grain, but numerous other U.S. agricultural products remain actual or potential targets of Chinese import tariffs, including soybeans, corn and pork.

The USDA said Friday that buyers from an undisclosed destination scrapped 949,000 tonnes of U.S. soybean purchases. Of that total, 829,000 tonnes were for shipment before September, the largest one-time cancellation of soybean sales since December 2016, according to USDA data.

The USDA did not respond to requests for comment about the undisclosed buyer.

Cancellations are not uncommon during the U.S. spring as buyers scrap unshipped U.S. purchases and opt instead for newly harvested Brazilian soybeans, which are typically cheaper. But an unusually steep drop in Brazilian prices over the past week has accelerated the shift, traders said.

Brazilian prices fell sharply as a weaker real currency brought a flood of soybeans to market, weakening prices in the export market.

“This was primarily a financial play resulting from very low Brazilian bean premiums relative to the U.S. But it also has the effect of totally protecting them against any risk of a soybean tariff if it were applied,” said Ken Morrison, a U.S. trader who worked for Cargill and now publishes a commodity newsletter.

Brazilian shipments to China are currently about $15 to $20 per tonne less expensive than U.S. Gulf shipments. Those prices were about even as recently as late April.

A proposed 25-percent import tariff on U.S. soybeans shipped to China would raise costs on U.S. imports by about $100 per tonne.

Exporters in Brazil have been aggressively marketing soybeans to global buyers as the country’s record harvest could have them shipping soybeans well into the traditional U.S. export season in the autumn.

“The Brazilian bean program seems like it has a longer tail. I’m seeing offers in September and October. That’s usually a time when they are shipping more corn than beans,” said a U.S. export broker who declined to be named.

Editing by Simon Webb and James Dalgleish