September 18, 2009

The US-Chinese trade row has threatened to spill over into the soy market on Thursday (Sep 17) when a Chinese government researcher said US soy were being dumped in China.

 

However, those in the industry said China is very unlikely to restrict soy shipments from its top supplier.

 

Chen Dongqi, vice-head of the macroeconomic institute of the National Development and Reform Commission, told a conference that the US government gives large amounts of subsidies to its farmers and dumps soy in China.

 

In the first eight months of this year, China imported a record 29.9 million tonnes of soy, with about 40 percent of which were accounted by the US.

 

Meanwhile, Li Ming, COFCO's assistant president and general manager of COFCO Agri Trading and Logistics, confirmed that China had already looked into taking action on US subsidies for soy shipped to China.

 

China has attracted record import volumes this year due to the government's stockpiling campaign as it offers to purchase local crops to support farmers' incomes. That in turn set a minimum price and resulted in a flood of cheaper imports.

 

However, tariffs on US soy are unlikely as China is already dependent on cheap and ample foreign supplies even before the drought hit its major growing regions in the northeast.

 

According to Nobuyuki Chino, president of Tokyo-based grains trading company Unipac Grain, there is no other source of cheap soy except the US until at least March or April. In later months, soy from Brazil and Argentina will make up the bulk of imports.

 

On the other hand, Qin Pei, an analyst at Guangtong Futures, said China might be keen to retaliate against Washington but hitting the soy sector would not be viable as the soy trade volume has reached around US$10 billion now.