June 29, 2018 / 8:12 AM / 2 years ago

Final countdown: last U.S. soybean cargo heads for China before tariff jump

BEIJING/SINGAPORE (Reuters) - A cargo of soybeans from the United States bought by China’s state grain stockpiler will arrive in China next Thursday, the last delivery before stiff import tariffs threaten supplies from one of China’s top suppliers, according to shipping data and two sources familiar with the matter.

The Peak Pegasus carrying 70,000 tonnes of the oilseed is scheduled to land at the port of Dalian at 4 p.m. (0800 GMT) on July 5 - just ahead of when the new higher tariffs take effect on July 6, according to Eikon shipping data.

One of the sources with knowledge of the matter said Sinograin, China’s state-owned stockpiler, was the buyer.

Sinograin did not respond to a request for comment.

Beijing says it will impose an extra 25 percent import duty on more than 500 U.S. goods, including soybeans, on July 6. The move was in response to Washington’s plan to slap duties on $50 billion of Chinese goods, as the trade dispute between the world’s top two economies escalates.

The tit-for-tat trade threats have already disrupted trade flows across the commodities sector from sorghum to coal and inflated prices of animal feed ingredients such as soymeal.

Over the past three weeks, China has canceled three cargoes of U.S. soybeans that would have shipped by Aug. 31, the latest casualties of the dispute, U.S. government data shows.

Soybeans, crushed to make cooking oil and the protein-rich animal feed ingredient soymeal, were the biggest U.S. agriculture export to China last year at a value of $12.3 billion, according to the U.S. Department of Agriculture (USDA).

For graphic on Anchored: 6 vessels carrying U.S. soybeans sit off China's coast click reut.rs/2tDfBLH


As the countdown to July 6 begins, the market is in limbo, said four traders that participate in the market.

Six vessels carrying just under 400,000 tonnes of U.S. beans, worth about $260 million at current prices, are anchored off China’s coast, Eikon shipping data shows. The Raraka has been moored off Jiangsu province for three weeks.

“Everyone is watching closely for any new development in the Sino-U.S. trade tensions,” said a trader with an international merchant. He declined to be named as he is not authorised to speak to the media.

“Now, people are more scared and refrain from buying any U.S. shipments.”

Another cargo booked for China was still loading on Thursday in the U.S. Pacific Northwest, and will arrive after the tariff goes into effect, a U.S.-based trader said.

For graphic on the last of the U.S. soybean cargoes click reut.rs/2KucSuo

Those cargoes might be the first to incur close to $6.5 million extra in taxes, a blow to China’s crushers, who worry tighter supplies will drive up costs and squeeze margins.

“(Crushers) can buy from Argentina or Paraguay, but they only have limited volume, not comparable with the U.S. or Brazil,” said Tian Hao, a senior analyst with First Futures.

“Or you can try to buy soymeal from overseas or U.S. beans indirectly, whichever alternative they choose, costs will rise.”

Reporting by Hallie Gu in BEIJING and Naveen Thukral in SINGAPORE; additional reporting by Michael Hirtzer in CHICAGO and Dominique Patton in BEIJING; Editing by Josephine Mason and Christian Schmollinger

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