China could buy less US farm products if US issues harsh response from Hong Kong: sources


BEIJING / SINGAPORE (Reuters) – China could cut agricultural imports from the United States if Washington reacts severely to pressure from Beijing to impose national security laws on Hong Kong, three sources said.

FILE PHOTO: Customs officials inspect a cargo of sorghum from the United States on a freighter at the port of Nantong, Jiangsu province, China February 11, 2020. China Daily via REUTERS / File Photo

China has pushed forward national security legislation for Hong Kong, raising fears for the future of the financial center.

US President Donald Trump has pledged a firm response and will hold a press conference on China later on Friday.

Sources have said that if Trump announces tough sanctions on Beijing, it could derail the trade deal the two countries have been working on for nearly two years, as any deterioration in relations could deter importers from buying U.S. agricultural products. .

If the US countermeasures are really tough, China will likely cut back on its purchases of US goods, a source familiar with the government’s plan said.

If the measures are soft, trade might not be affected, the source added.

As part of its initial Phase 1 trade deal in January, China pledged to purchase an additional $ 32 billion in U.S. agricultural products over two years, above a baseline based on the numbers. from 2017.

Soybeans were the main U.S. agricultural commodity shipped to China in 2017, with shipments worth $ 12 billion, and traders said they expected China to step up purchases of U.S. cargoes from the United States. oilseeds.

“Commercial buyers are still learning about the new American (soybean) crop and preparing to import American beans,” a source from a major trading house said.

“But that could change due to possible political setbacks … Commercial buyers are very nervous right now,” the source said.

China has already bought US soybeans and corn in several rounds of purchases this year, but the typical peak period for Chinese purchases of US crops comes after the fall harvest. These purchases can now be questioned.

“Tensions between the United States and China mean that private companies are less inclined to buy American products,” said Darin Friedrichs, senior commodities analyst for Asia at INTL broker FCStone.

“US soybeans should not only be price competitive, it should be price competitive given the great US-China political risk,” Friedrichs said.

Crushing margins for U.S. shipments after September are increasingly economical for crushers compared to competing supplier from Brazil as the U.S. harvest approaches, traders said.

Whether China will continue to buy US beans “will likely depend on the US response to Hong Kong,” a state-owned trader said.

Report by Hallie Gu in Beijing and Keith Zhai in Singapore


Leave A Reply