By Hallie Gu and Shivani Singh
BEIJING (Reuters) - China is set to speed up purchases of U.S. farm goods and will implement the Phase 1 trade deal with the United States, an executive at state-owned agriculture trading house COFCO said at an online industry conference on Thursday.
Beijing pledged to buy additional U.S. agriculture products worth $32 billion over two years above a 2017 baseline under the Phase 1 trade deal signed in January.
"China will still implement the trade deal and chances are high that China will speed up purchases," Zhang Hua, vice general manager of China, COFCO International said.
Soybeans were the top U.S. farm product shipped to China in 2017, with cargoes worth $12 billion, and traders have expected China to continue buying large volumes of the oilseed.
However, falling crush margins and an expected jump in China's soybean inventories in coming months could make buying U.S. beans uneconomical for soy processors, Zhang cautioned.
Chinese buyers have booked large volumes of cargoes from top supplier Brazil for delivery in coming months which, along with the arrival of weather-delayed shipments from earlier months, are expected to lead to large inventories of both soybean and soymeal.
Zhang said it could take up to five months to digest the arrivals, with inventories likely to peak around July and August, pushing down meal prices.
"Chinese crushers will struggle with bad crush margins for a long time in the future, even until September," Zhang said.
Graphic - Soy Armada: Dozens of vessels carrying soybeans from S. America are en route to importers, mainly China: https://fingfx.thomsonreuters.com/gfx/ce/jznpneoxovl/Soy%20Armada%20May%202020.png
Traders expect soybean arrivals to top 9 million tonnes a month in May, June and July, well above normal levels.
China's soybean imports in the 2019/20 year to end-August are expected at 87.50 million tonnes, Zhang said, including 63.73 million tonnes from Brazil and about 13.70 million tonnes from the United States.
In calendar 2019, China brought in 16.94 million tonnes of U.S. soybeans, just up from 16.6 million tonnes in 2018 when shipments nearly halved from the previous year due to the trade dispute.
Graphic - China soybean imports by arrival month: https://fingfx.thomsonreuters.com/gfx/ce/bdwpkrnzevm/CHinaSoyArrivalsMay2020.png
Even if U.S prices were not suitable for soybean crushers, state companies could still import U.S. supplies, Li Qiang, chief analyst with China's leading agriculture consultancy Shanghai JC Intelligence Co. Ltd, told the conference.
"The purchases would be made based on market conditions and commercial considerations," Li said. "The considerations could be from both private firms and state owned ones."
China plans to add about 10 million tonnes of soybeans, mainly from the United States, along with other agricultural products to build up state reserves, Reuters has reported.
Beijing is also expanding use of low-tariff quota for grains imports, to step up purchases of U.S. agriculture products.
China announced on Thursday that it will allow imports of barley and blueberries from the United States effective on the day, according to notices on its customs website.