EU seeks to soothe U.S. by clearing soybeans for biofuel

BRUSSELS/NEW YORK (Reuters) - The European Commission said on Tuesday it had concluded that U.S. soybeans can be used in biofuels in the European Union, part of the bloc’s push to improve strained trade relations with the United States.

FILE PHOTO - A trailer is filled with soybeans at a farm in Buda, Illinois, U.S., July 6, 2018. REUTERS/Daniel Acker

However, industry sources said it was unlikely to lead to a flood of additional U.S. soybean imports into Europe.

U.S. President Donald Trump agreed in July not to impose tariffs on EU car imports while the two sides explored ways to boost trade including a possible deal to remove tariffs on non-auto industrial goods and to boost EU imports of U.S. soybeans and liquefied natural gas.

The Commission said in a statement the recognition of U.S. soybeans for use in biofuels was valid until July 1, 2021, but could extend beyond that date as long as they met sustainability criteria set in new EU rules in the 2021-2030 period.

“Today’s decision is new proof that the European Union is delivering on our commitments,” a Commission spokesman said.

Currently, the United States exports soybeans to the EU for animal feed but the soybean oil byproduct has to be shipped back because Europe does not allow it to be used for fuel. The new rule would change that.

“So, on its face, it does nothing to increase soybean exports in the EU,” a U.S.-based lobbyist for the biodiesel industry said. “It just helps European farmers capture the full value and saves U.S. farmers shipping costs.”

One U.S. Congressional staffer described the move as more the removal of a trade barrier.

EU biofuel producers used an estimated 400,000 tonnes of soybean oil for biofuel production in 2018 against some 5.9 million tonnes of rapeseed oil, the main feedstock, according to Claus Keller of German commodity analysts FO Licht.

“I think the EU move will be positive for U.S. soybean sales prospects to the EU but it will not open a floodgate,” he said, adding that sales would be influenced by U.S.-China trade talks and on the future for Argentine biodiesel, which faces duties in the United States and could face measures in Europe.

The Commission, which negotiates trade deals for the 28-nation EU, has said the July agreement led to a 112 percent rise in U.S. soybean imports in the second half of 2018.

The United States is Europe’s main supplier, with a 75 percent share of EU soybean imports.

The increase has been driven by a slide in the U.S. soybean price, which slid after China imposed higher tariffs on U.S. beans in its trade row with Washington, rather than because of any concerted action by the EU, analysts said.

The EU imports about 14 million tonnes of soybeans per year as feed for animals.

Reporting by Philip Blenkinsop in Brussels, Michael Hogan in Hamburg, Jarrett Renshaw in Philadelphia, Humeyra Pamuk in Washington; editing by David Evans