Chinese buyers favor Argentine soybeans after export tax elimination

Chinese buyers have reserved at least ten shipments of Argentine soybeans following Buenos Aires's decision to eliminate grain export taxes, according to a Reuters report on Tuesday. 

This development further disadvantages US farmers, who are already excluded from their primary market and grappling with low prices.

Argentina's temporary tax policy has enhanced the competitiveness of its soybeans, leading traders to secure shipments for fourth-quarter inventories in China. 

This period typically sees dominant US shipments, but the ongoing trade conflict between Washington and Beijing has created uncertainty.

According to the report, November shipments of 65,000 metric tons (Panamax-sized) are scheduled, with Cost and Freight (CNF) prices quoted at a premium of $2.15-$2.30 per bushel over the Chicago Board of Trade (CBOT) November soybean contract.

One of the traders quoted in the Reuters report said that buyers from China had booked 15 cargoes. 

Setback for the US

For US farmers, these deals represent another setback. 

They are losing out on billions in soybean sales to China during their peak marketing season.

This is due to stalled trade talks, which have halted exports, allowing South American competitors, particularly Brazil, to seize the market share, according to traders and analysts.

Traders report that China, the world's leading soybean importer, has not yet bought any US soybean shipments from the current autumn harvest.

A recent phone call between Chinese President Xi Jinping and US President Donald Trump on Friday yielded no agricultural updates. 

This lack of progress further pressured Chicago soybean futures, which are already hovering near five-year lows.

Previous reports suggested that China had almost finalised its soybean purchases for October shipment and secured about 15% of its November requirements, exclusively from South America. 

In prior years, by the same point, traders indicated that China would have acquired 12-13 million tons from the US for September-November shipment.

Tax break

Chinese soymeal futures dropped on Tuesday following Argentina's announcement of a temporary suspension of grain taxes.

This measure will remain in effect until October or until declared exports hit $7 billion.

Earlier in the day, China's most-active Dalian soymeal and soybean oil futures both experienced a 3.5% decline.

Argentina generally levies a 26% export tax on soybeans.

China's soybean imports reached unprecedented levels in May, June, July, and August.

This surge boosted inventories, partly due to buyers hedging against possible supply disruptions in the fourth quarter.

"Looking ahead, the key factors to watch are actual Argentine soybean purchases and arrivals, along with the outcome of US-China talks and how they might affect soybean imports in the fourth quarter and early next year," Wan Chengzhi, an analyst at Capital Jingdu Futures was quoted in the report.