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China drops U.S. sorghum probe amid chaos in global grain market

Reuters  |  BEIJING 

(Reuters) - dropped its anti-probe into imports of U.S. sorghum on Friday, beating a hasty retreat from a dispute that wreaked chaos across the global grain market and raised concerns about rising costs and financial damage at home.

The move was seen as a goodwill concession as Chinese was in for talks aimed at resolving trade tensions between the world's two largest economies.

China's said in a statement the investigation had revealed that anti-and anti-subsidies penalties would inflate living costs for Chinese consumers.

The investigation launched in early February had quickly showed its top trading partner how much financial pain it could inflict on U.S. farmers, analysts said. Last month, also imposed hefty anti-deposits on imports of the grain.

"has taught a lesson to the and showed how it can hurt U.S. exports," said Ole Houe, director of at brokerage in

"Now they are showing goodwill by halting its anti-dumping investigation into sorghum imports, but it is a cheap way of showing goodwill as the U.S. does not have much sorghum left to export. The next U.S. sorghum crop will be harvested in August."

are considered one of the most powerful weapons in Beijing's arsenal because a strike against farm exports to would hurt mostly states that backed U.S.

The accounts for more than 90 percent of total sorghum shipments to China, with imports from the U.S. worth just over $1 billion last year.

The deposit scheme disrupted supply chains worldwide, with almost two dozen ships carrying U.S. sorghum stranded at sea, as merchants and buyers scrambled to sell cargoes at big discounts elsewhere.

The probe had sparked worries that tariff-inflated costs for sorghum, used in liquor and animal feed, would be passed onto feedmakers and eventually inflate

The ministry said it would return the deposits it had collected. The brought some unexpected relief to Chinese buyers who still had cargoes stuck at ports.

"This is great news! We are now saved," said a who had over 600 tonnes of U.S. sorghum stranded at a Chinese port. "We will clear our goods immediately today."

The shipped 4.76 million tonnes of sorghum to China in 2017, worth around $1.1 billion and making up the bulk of China's roughly 5 million tonnes of imports of the grain last year, according to Chinese customs data.

For many, though, the damage has been done. warned earlier this month it will take a $30 million hit to trading profit due to the dispute.

"Damage has been done, and mainly to the domestic buyer," said Cherry Zhang, at

"The government won't compensate you for the losses out of reselling and demurrage."

(Reporting by Tony Munroe, and Hallie Gu; Editing by Tom Hogue)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, May 18 2018. 11:31 IST