(Bloomberg) -- China's hunger for soybeans from Brazil, the world's top exporter of the oilseed, has spurred a price rally, signaling the Asian nation quietly started to eschew cargoes from the U.S. weeks ago.
The premium paid for soybeans loading in May at Brazil's Paranagua port has jumped 63 percent to $1.17 a bushel in the past month, according to data from broker Ary Oleofar. The cost reflects the difference between futures on the Chicago Board of Trade and domestic prices at the port.
The premium jumped because China has opted for Brazilian supplies at the expense of U.S. cargoes, Pedro Dejneka, a partner at Chicago-based MD Commodities, said in a telephone interview. “China has already been retaliating against the U.S. behind the curtain.”
If the Brazil premium rises too much, U.S. supplies under tariff may become more attractive to Chinese buyers, along with other importers, he said.
Brazil's output may climb to a record 117.1 million metric tons with exports estimated at 73 million tons, while domestic processing accounts for 42 million, Dejneka said. That means China will continue to rely on U.S. shipments to meet demand.
“Brazil still can't supply all the Chinese demand alone,” he said. The U.S. is the world's second-biggest exporter.
To contact the reporter on this story: Tatiana Freitas in São Paulo at tfreitas4@bloomberg.net.
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Patrick McKiernan, Steven Frank
©2018 Bloomberg L.P.
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