BOABC Viewpoint: No substantive progress in China-US negotiations, China's soybean imports to fall to about 85m tons this year

In mid-July, the state leaders of China and the United States showed some sincerity when they met in Osaka. Then millions of tons of American soybeans were shipped to China. At the same time, the United States also announced an exemption from tariffs on 110 Chinese industrial products. Sources say 5 companies (Yihai Kerry, Jiusan Group, Shandong Bohi, Hope Full Grain and Oil and Zhoushan Zhonghai Cereals and Oils) may apply for 25% tariff exemption from the arrival of the American soybean before the end of December. Reports also say that these crushers may intend to purchase 6.8 million tons of no-tariff soybean, but whether the soybean can be delivered to China will be determined by the later policy trend.
 
China and the United States held the 12th round of high-level trade negotiation in Shanghai from July 30 to 31, but there was no substantive progress. The two sides had in-depth exchanges on major trade issues and discussed China's increasing purchase of agricultural products from the United States according to demand and the favorable conditions the United States will create for purchasing. Negotiations will resume in September.
 
Despite the exemption, domestic processors are in no rush to buy US soybeans, with imports expected to fall to about 85 million tons in 2018/19, down about 9 million tons from last year. This is mainly because:
1) The poor pressing profit at present makes most oil plants stay at break-even or slightly profitable situations, and the long-term trend of China-US trade relation is still uncertain; the supply of soybean will be sufficient in August and September, and the purchasing enthusiasm of enterprises is not high.
2) Currently, the African swine fever epidemic in China continues to affect the relevant markets. The feed demand is not flourishing, and the feed enterprises demand a lower price and slowed down the purchase, which leads to the rapid expansion of soybean meal inventory in the oil factories and even resulted bloated storage in some factories.