China Processors Seek Help
China's financially strapped soybean processors are appealing to U.S. grain companies to help keep them afloat by accepting measures such as deferred payments to avoid defaults, U.S. traders told Reuters News Service Thursday.
The processors, many of whom signed agreements in Chicago five months ago to buy 2.5 million metric tons of U.S. soybeans, are also telling the companies they want more say over prices since China has become the world's top soybean importer, Reuters reports.
Traders said China's Soybean Importers Chamber of Commerce has circulated a draft letter seeking feedback from exporters on measures proposed by the government-sponsored body, which led the soy-buying mission to Chicago last December.
A translated copy of the letter obtained by Reuters states Chinese soybean crushers have been suffering financial losses for seven months due to a credit crunch, excessive purchases of high-priced soybeans and poor margins.
“Some of our members might request to cancel, delay payment, delay shipment, resell or wash out (their contracts). It is expected your companies could cooperate as much as you can to help the companies pull through," it said.
U.S. grain traders said losses on previously priced, but undelivered soybean cargoes are at the core of the Chinese industry's complaints. "This is just a trade ploy," said one trader with a global grain trading company who had seen the letter.
He also brushed aside the chamber's proposal that exporters should agree to price their sales to China on soybean futures at China's 10-year old Dalian Commodity Exchange instead of at the CBOT, the world's largest commodity exchange.
"The pricing point for the world's trade in soybeans is Chicago," the trader said, acknowledging that the proposal was aimed at prices better reflecting soy values in China, the demand side, rather than in the U.S., the top exporter.
The chamber, which says its 15 members account for 90% of China's soybean crushing capacity, said in the letter "our vast members find from their own experience that there is obvious bug in the pricing system" based on the CBOT.
Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.
To see more market perspectives, visit Brock's Web site at www.brockreport.com.