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UPDATE 1-Importers snap up cheap U.S. soybeans as China stops buying

(Adds USDA cutting U.S. export forecast and raising soy stocks
forecast to record high in paragraph 27)

By Karl Plume

CHICAGO, July 12 (Reuters) - China's retaliatory tariffs on
U.S. soybeans, threatened for weeks and enacted Friday, have
driven down prices and triggered a wave of bargain shopping by
importers in other countries stocking up on cheap U.S. supplies,
according to a Reuters analysis of government data.

Chinese buyers have so far this year accounted for just 17
percent of all advanced purchases of the fall U.S. soybean
harvest - down from an average of 60 percent over the past
decade, the analysis found. They are instead loading up on
Brazilian soybeans, which now sell at a premium of up to $1.50 a
bushel as U.S. soybean futures have fallen 17 percent over
six weeks to about $8.50, their lowest level in nearly a

The price gap has sparked a run on U.S. soybeans by
importers from Mexico to Pakistan to Thailand, according to the
analysis of U.S. Agriculture Department data.

Even as China has retreated, all importers' advanced
purchases of the next U.S. soybean crop shot up 127 percent
through June, at 8 million tonnes, compared to the same period
last year, the analysis showed.

The purchases are the latest example of how politics are
upending billions of dollars in global trade flows as U.S.
President Donald Trump fights a trade war with China.

Beijing imposed tariffs on $34 billion worth of U.S.
products on Friday, from soybeans and cotton to automobiles and
airplanes, in retaliation for U.S. tariffs enacted the same day
on Chinese goods of equal value.

The decline of China's purchases of U.S. soybeans and the
jump in those from other countries amount to a collective bet
against any swift resolution of the escalating trade war between
the world's top two economies.

Even Brazil, the world's top soybean exporter, is prepping
for major purchases of U.S. soybeans to feed its domestic
processors as it diverts more of its own crops to China at
premium prices, according to exporters association Anec. Brazil
may import up to 1 million tonnes of U.S. soybeans, with
purchases likely ramping up in October, said Anec representative
Lucas Trindade.

Brazilian soy bean processors, which turn the crop into
cooking oil and animal feed, normally have no need for U.S.
soybeans. But soon it may be cheaper for them to import beans
grown thousands of miles away in the U.S. Midwest than to buy
local crops.

"It seems irrational, but there is a possibility if prices
in Chicago (futures) approach the $8 level," said Alessandro
Reis, head of origination and logistics at CJ Selecta, a soy
processor and trading firm in Brazil.

Grains merchants who dominate the soybean markets -
including Archer Daniels Midland Co, Bunge Ltd
and Cargill Inc - are working to minimize the impact
of the sudden drop in Chinese demand by diverting cargoes

Bunge Ltd and ADM declined to comment. Cargill did
not respond to requests for comment.

Representatives of the U.S. Soybean Export Council have been
meeting with buyers in Asia and Europe to encourage them to buy
U.S. soy, said Jim Sutter, CEO of the U.S. Soybean Export
Council. The moves are part of a broader effort launched this
spring to raise demand for soy in countries such as Indonesia
that normally buy from Brazil.

"With the recent price declines that we've seen - wow -
soybeans in general are on sale," Sutter said. "Buyers around
the world ought to be stocking up."

The advanced purchases data include buyers who did not
disclose their identity or location, which at 3.9 million tonnes
are about 1 million tonnes above normal. Even if all those
purchases came from Chinese buyers, the nation's total share of
the advanced crop purchases would be its lowest in 13 years, the
Reuters analysis shows.

(For a graphic on China's falling share of U.S. soybean
purchases, see: )


China buys two-thirds of the world's soybean exports and,
historically, more than half of U.S. soybean shipments, worth
$12.25 billion last year.

The council has invited more buyers from countries in
Europe, the Middle East and North Africa to an annual
import-export conference next month.

Surging Brazilian prices are already steering importers in
Europe - such as the Netherlands, Spain and Italy - to buy more
U.S. shipments. A German soybean trader who declined to be named
said U.S. soybeans shipped to north Europe are about $372 to
$378 a tonne for July and August delivery, well below Brazilian
beans at $405 a tonne.

"There is big global demand for U.S. soybeans, which I think
will continue for the rest of 2018," said the German trader.

Mexico has booked nearly 1 million tonnes in advanced
purchases of U.S. soybeans - four times more than last year -
while Pakistan's 273,000 tonnes in forward purchases are up 44
percent from a year earlier, the USDA data shows. Thailand's
record 221,400 tonnes in advance deals are nearly 10 times
larger than the average over the prior six years.

No. 3 exporter Argentina has also bought U.S. soy to
supplement its own drought-stricken crop.

U.S. soybean prices could fall further after the crops are
harvested from September through November if Chinese buyers
continue to avoid U.S. soybeans.

"Pakistan, Mexico, Bangladesh and a few others have bought,
and that's kept values supported," said a U.S. soybean exporter
who asked not to be named because he is not authorized to speak
to media. "But eventually you'll run out of non-China buyers."


The purchases could temporarily spare U.S. farmers from some
of the pain of Chinese tariffs.

"Fortunately, we have seen some sales pick up to other
destinations," said Monte Peterson, a soybean farmer in Valley
City, North Dakota.

But with farmer margins already razor-thin due to low
soybean prices, Chinese demand will be sorely missed this fall,
when prices typically enter a seasonal slump, Sutter said.

The U.S. Department of Agriculture on Thursday slashed its
export forecast for the next soybean crop and said leftover
supplies ahead of the 2019 harvest would be the largest on
record due to the trade war with China.

The pivotal question for U.S. farmers is how long
bargain-shopping nations can fill the void. Chinese grain buyers
face the flipside of that dilemma in trying to keep the nation's
livestock herds fed without U.S. soybeans.

China may have to buy up to 15 million tonnes of U.S. beans
at tariff prices - about half of what it buys now, Rabobank, the
Dutch financial services firm, predicted in a research note.

"From October to January, they will have to rely on the
United States for some of the soybean supplies although volumes
could be less," said Phin Ziebell, an agribusiness economist
with National Australia Bank. "We can't imagine a scenario where
China does not need U.S. beans."

(Additional reporting by Mark Weinraub and Tom Polansek in
Chicago; Ana Mano in Sao Paulo; Michael Hogan in Hamburg;
Valerie Parent in Paris; and Naveen Thukral in Singapore;
Editing by Caroline Stauffer and Brian Thevenot)

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