2018 quality regulations could impact Chinese sales
Half of U.S. soybeans exported to China in 2017 would not have met new Chinese routine delivery rules to be enacted in 2018, according to shipping data reviewed by Reuters, signaling new hurdles in the -billion-a-year business.
More stringent quality rules, which take effect on January 1, could require additional processing of the U.S. oilseeds at Chinese ports in order to remove impurities. This could raise costs and reduce sales to the world's largest soybean importer, according to U.S. farmers and traders.
Half of the 473 vessel shipments and half of the total 27.5 million tons of U.S. soybeans exported to China in 2017 contained more than 1 percent of foreign material, exceeding a new standard for speedy delivery, according to U.S. Department of Agriculture (USDA) data compiled by grain broker McDonald Pelz Global Commodities LLC.
"It's going to raise the costs of sending the soybeans to China," said Richard Wilkins, a Delaware farmer and former chairman of the American Soybean Association.
Growers often receive a higher price for selling soybeans with 1 percent or less foreign material, known as No.1 grade, because importers pay more for better quality.
Wilkins said the change would deliver higher-grade soybeans to Chinese buyers without requiring a premium price. "They basically want to pay us for No.2 grade but they want it to be No.1 grade," he said.
Osama El-Lissy, a deputy administrator at the USDA, said farmers should not face additional burdens under the new standards. "Nothing in the agreement we have with China would lead anyone to believe that there would be a change in whatever price arrangement [is] currently being agreed to," he said, noting Chinese buyers already may subject some shipments to additional processing.