February 3, 2010


Sino-US arms sale row unlikely to dent soy exports



China, angry over the US planned US$6.4 billion arms sale to Taiwan, is unlikely to stop buying US soy as America is among three nations that have large, cheap supplies needed by Chinese industries.


Anne Frick, an oilseeds analyst with Prudential Bache Commodities in New York said, "There are really only three countries in the world they can get soybeans from and during the first half of the world crop year, the US is predominantly the world's largest supplier."


The market was wary for any cancellation of Chinese purchases as the arms sale row comes at a time when soy prices for South American supplies have fallen below US prices amid prospects for record crops in Brazil and Argentina.


Soy buyers usually buy the bulk of their soy from South America during first few months of the year before turning their attention to the US ahead of harvest in September and October.


China has bought about 21.3 million tonnes of US soy in the current marketing year ending August 31 but around 5.7 million tonnes - worth about US$2 billion at current export prices - have yet to be shipped.


"A lot of analysts suggesting that the Chinese may take some action against importing US soy given the announcement of US military sales to Taiwan, but this has happened in the past without any general trade problem," Charlie Sernatinger, an analyst with Fortis Clearing Americas in Chicago, said.


Beijing is irate over US proposals to sell US$6.4 billion of weapons to Taiwan. China has said the arms dispute will damage cooperation with the US over international issues.


Meanwhile, CBOT soy prices rose sharply on Tuesday (Feb 2) as a rally in the crude oil market and technical buying following a 12% downturn during January overwhelmed concerns about China. CBOT March soy <SH0> rose 15-3/4 cents to close at US$9.25-1/2 a bushel.


The availability of cheaper supplies from South America and makes it possible for China to roll some of its US purchase commitments until later in the year.


China is the No. 1 importer of soy from the US, the top global exporter ahead of Brazil and Argentina. US purchases this season are valued at around US$7.5 billion.

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