June 23, 2004

 

 

Brazil Soy Exporters Remain Nervous Of China Trade

 

With uncertainty still surrounding a Sino-Brazilian agreement to end a Chinese ban on Brazilian soybean imports, local exporters await clarification before even considering new trade with the Asian giant, said traders.

 

"We are waiting for the agreement to be published, if indeed it will be. It is far too early to make business decisions," said one Sao Paulo-based trader at a multinational firm.

 

On Monday, Brazilian Agriculture Ministry officials said they had reached an agreement with China's quarantine bureau to allow the 23 companies banned from importing Brazilian soybeans to resume shipments.

 

The Chinese embassy in Brazil confirmed an accord had been reached. But press reports coming out of China on Tuesday indicated that the details had not been tied up, and Brazilian imports were not yet cleared for entry.

 

Should the agreement be confirmed, "there remains the issue of what will happen to the shipments waiting at port and on their way to China," said David Brew of the Brasoja brokerage in Porto Alegre, southern Brazil.

 

At least five vessels carrying Brazilian soybeans are still waiting at Chinese ports after Chinese authorities banned entry because fungicide-tainted seeds were discovered in the hold.

 

Exporters estimate that the Chinese decision to stop around 90% of imports since May has cost them around $1 billion in trade.

 

With Chinese soybean stocks still high, Brazilian exporters do not expect China to come back into the market for their beans any time soon.

 

"They are likely to wait for (the probably bumper) U.S. crop to arrive and to take lower prices then," said Steve Cachia, analyst at the Cerealpar brokerage.

 

Exporters will try to insist on water-tight export contracts to China next year and possibly include a risk premium into contracts with China. However, competition for the Chinese export market, the world's largest, is such that premiums may go by the wayside.

 

"Everyone needs to trade and you do what it takes to get the deal done," said Brasoja's Brew.

 

Trading with China is always difficult, he said, noting there were always problems with soyoil exports and that now it has hit soybeans.