(Yicai Global) April 10 -- China soybean prices jumped this week as the trade dispute between the world’s two biggest economies spreads to the agricultural products market after China announced retaliatory import duties on US soybeans.
Futures contracts gained 4.2 percent in trading yesterday, with Dalian soymeal prices climbing to a 16-month high.
China’s tit-for-tat measures against the Trump administration’s proposed tariffs on hundreds of Chinese products caused US soybean prices to plummet more than 5 percent last week. But after remarks from President Donald Trump appeased market sentiment, prices continued to rebound and US soybean futures rose to USD10.
Nearly two-thirds of the soybeans produced by US farmers each year are sold to China, with a total value of nearly USD14 billion. China’s soybean imports have doubled over the past decade. Last year, more than 60 percent of US soybean exports went to China, per data from the American Soybean Association (ASA).
China’s tariff on US soybeans will directly hit the US soybean industry, market observers believe. ASA also said that US soybean growers have been frustrated because they will pay for the trade spat between the two countries.
The quarrel deeply concerns US soybean market players because of a possible 71 percent slump in exports to China in the face of Beijing’s retaliatory duties, according to an earlier report by the US Soybean Export Council. China decided to impose 25 percent tariff on soybean imports from the US.
“In a scenario where China imposed a 30 percent tariff, Chinese imports of U.S. soybeans could drop by 71 percent, total U.S. soybean exports could fall by 40 percent, and total U.S. soybean production could decrease by 17 percent,” suggested a report entrusted by the Council.
If China restricts import of soybeans from the US, it will hurt Chinese consumers, especially the growing middle class, more than American farmers, claimed US Ambassador to China Terry Branstad in a television interview with Bloomberg earlier.
However, the impact of trade disputes on soybeans is more psychological, said a report released by Chinese investment bank CITIC Securities Co. From April to August each year, soybeans in South America dominate the supply to China. During this period, tariffs imposed on US soybeans have limited impact on China's industrial chain, the report said.
“As far as the soybean industry is concerned, tariffs on US soybeans will be positive for China’s agriculture,” said Song Qinghui, an economist. “In addition, the impact of soybean prices on consumer price index is probably less than 1 percent. As the impact of tariff increases on domestic CPI is roughly 0.1 percent, the inflation is controllable. On the whole, adding tariffs to US soybeans has a limited impact on China’s inflation.”