China Soybean Buyers Draw Up Contingency Plans

Chinese buyers of soybeans, the United States’ biggest agricultural export to the country, are quietly drawing up contingency plans to ensure supplies of critical raw materials in the event of a trade war, a Reuters report said citing industry sources.  The moves are the strongest sign yet that businesses in the world’s most populous country are growing worried that critical commodities could get caught up in escalating trade tensions. 

At least two trading houses have started buying more rapeseed meal, an alternative ingredient used to make animal feed, in case the oilseed is a target of retaliation by Beijing, sources at the company familiar with the strategies said. As an extra layer of protection, his company has also started to include exit clauses in purchase contracts with U.S. suppliers giving them the right to cancel the order if needed.  

The second source said their firm was also purchasing more domestic distillers’ dried grains (DDGS), a byproduct of ethanol production  used as an animal feed ingredient. The company is also considering ramping up purchases of Brazilian soybeans.