China buys Brazilian soybeans before trade deal with US

China is picking up soybean cargoes in Brazil, dashing hopes for big American sales immediately after a partial trade deal is signed with the U.S. next week, according to people familiar with the matter.

Private buyers from China have purchased about 10 cargoes from the South American nation so far this week, said the people, who asked not to be identified because the deals are private. Most of the soybeans are for shipments from January through April, the people said.

The Brazilian purchases, while not unusual for this time of year, come just as the U.S. and China are expected to sign a phase-one trade pact on Jan. 15. They also highlight China’s willingness to buy American supplies only when they are cheaper than elsewhere.

Brazil, the world’s largest soybean exporter, is starting to harvest what is forecast to be a record crop, bringing prices down. Brazilian supplies are cheaper than those from the U.S., attracting private Chinese buyers who only focus on crushing margins, according to Monica Tu, an oilseed analyst at Shanghai JC Intelligence Co.

China has pledged to buy $40 billion a year in American agricultural products, a high target that will require big purchases of soybeans from the U.S. China’s imports of U.S. soybeans rose to the highest in 20 months in November after more American cargoes cleared customs.

China has been issuing regular tariff waivers for domestic firms to buy U.S. soybeans. The exemptions cover the 30% retaliatory duties on the American oilseed, which Chinese buyers process into edible oil and animal feed. The country is reviewing tariff exemption applications for U.S. goods worth $60 billion, according to a government statement.