China tells companies to stop buying US agricultural goods

China tells companies to stop buying US agricultural goods

Beijing has asked its state-owned enterprises to halt US agricultural goods purchases in a fresh blow to US farmers and traders after President Donald Trump further ramped up tariffs on Chinese imports.

Agricultural products, especially soyabeans, have been at the centre of the escalating US-China trade war, with the US insisting that China must make substantial purchases of the crop as part of any trade deal.

Before the trade war began, China was the largest importer of US soyabeans, buying 25m-30m tonnes a year. However shipments have plummeted: since the start of the crop year in September it has agreed to buy only 14m tonnes, of which 10m has been shipped, according to official US data. The US delivered just 5.3m tonnes of soyabeans to China in the first five months of this year, against 15.2m tonnes in the first five months of 2018.

The Chinese ministry of commerce said last week that since July 19, some Chinese companies — including state-owned enterprises — were in the process of making “new purchases” of US soyabeans, cotton, pork and sorghum, and that some deals had already been reached.

But now, China’s state-owned companies had “received an order” to halt purchases, said two people who knew of the order. State-run Xinhua news agency reported that Chinese companies had suspended purchases of US farm products as a retaliatory measure.

Despite earlier promises of a trade deal from Mr Trump, “this kind of feedback from China shows that the situation isn’t getting better”, said Matt Ammermann at commodity brokers INTL FCStone in Chicago. “Long term, exporting companies are asking themselves ‘what do we do?’”

Beijing’s new measures are in addition to the 25 per cent tariffs on soyabeans and many other US agricultural goods it imposed in July last year. Since those tariffs were implemented, US soyabean prices, which were trading at around $10 a bushel in early 2018, have fallen 15 per cent to $8.50.

After Mr Trump and Chinese president Xi Jinping met at the G20 summit in Buenos Aires late last year, Beijing committed to import at least 20m tonnes of US soyabeans, although this has not materialised in full.

The Chinese government has used one-off deals to purchase US agricultural products as goodwill gestures on several occasions during the trade talks, most recently at the end of June when China agreed to buy 544,000 tonnes of soyabeans from the US, worth $200m.

Mr Trump complained last week on Twitter that China had agreed to buy agricultural products from the US “in large quantities” but had failed to do so.

The US president’s complaints came after trade representatives returned to the US from talks in Shanghai last Wednesday without a deal.

Both sides originally said the talks had been “constructive” but the following day Mr Trump announced that additional tariffs of 10 per cent on $300bn of Chinese exports to the US would take effect on September 1, extending tariffs to nearly all goods imported from China.

Last week, before the trade talks resumed, Mr Trump unleashed a barrage of criticism, saying: “That is the problem with China, they just don’t come through.”

As a substitute for soyabeans from the US, the Chinese commerce ministry last week announced it would seek to “expand soyabean imports from Russia”. 

“China has already become the biggest destination for Russian agricultural exports,” said commerce ministry spokesperson Gao Feng. “Next, China is willing to work together with Russia to steadily expand market access and continuously improve the level of ease of bilateral trade.”

Chinese soyabean buyers have also been increasing orders from Australia and Brazil, as well as drawing from state reserves.

Chinese futures for imported soyabeans rose to the daily increase limit on Monday, up 3.98 per cent to Rmb3,213 ($456) a tonne. 

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