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Global trade war to be a boon for Black Sea grain

Reuters  |  MOSCOW/BEIJING 

By and Hallie Gu

MOSCOW/(Reuters) - Trade conflict between the and could further boost already booming grain and oilseed exports from the region, traders and analysts said.

New opportunities to sell wheat, corn and soybeans to and even the are set to open up for the region's main exporters Russia, and Kazakhstan, whose recent ascendancy has already ended full U.S. dominance in markets such as and

The and slapped tit-for-tat duties on $34 billion of each other's imports on Friday, with accusing of triggering the "largest-scale trade war".

The region's share of the international wheat market climbed to about 37 percent in 2017/18, according to the International Grains Council, comfortably topping the and combined.

China is the world's top but still imports about 4 million tonnes of the grain each year.

In the 2017/18 season (June/May) the United States exported 902,400 tonnes of wheat to China, down from 1.56 million in the prior season, according to data.

For Kazakh wheat, the pick-up in Chinese imports started due to Beijing's Belt Road policy and before the trade dispute took off, but the tariff row accentuates the trend.

"We have just started buying wheat from this year. Our first order was for several thousand tonnes," a Chinese wheat said. "We will see about sales and profits. If they're good, we will increase imports for sure. It is related to the current trade war."

"Now that you can't bring in American wheat, it gives us more incentive to buy from And once your trading of Kazakh wheat reaches a certain volume, you get government preferential support," the added.

Among the risks for this strategy are difficult logistics and unstable quality seen in Kazakh and Russian wheat, said another who has been looking for more Kazakh wheat deals.

wheat may not be able fully to replace its U.S. counterpart due to different quality grades, meaning some traders will also turn to Canadian wheat, he added.

According to statistical data, and Ukraine, whose traditional buyers had been in and the Middle East, boosted wheat supplies to Vietnam, Indonesia, the Philippines, Spain, Tunisia, Tanzania, Sudan, Oman, and in the 2017/18 season.

One location in which has taken away from U.S. wheat market share is Nigeria, which like traditionally favours a higher-protein grain such as U.S. hard red winter.

PRICES LOUDER THAN WORDS

In a sign that may worry some U.S. wheat traders further, bought Russian wheat in July for the first time in eight years.

"In this new era of trade wars, prices talk louder than words," said Swithun Still, director of Solaris, which specialises in trading Russian agricultural commodities.

"It's likely that China will aim to buy more grains and oilseeds from the Black Sea and more beans from has been buying lots of Russian wheat and will continue as prices are attractive compared to U.S. wheat," he added.

The trade spat could also boost exports of Black Sea corn and soybeans.

Russian authorities recently reported a record 850,000 tonnes of soybean exports to China in July 2017-May 2018, more than double the 340,000 tonnes a year earlier, Svetlana Malysh, Kiev-based Black at Thomson Reuters, said.

"Black Sea countries, mainly Russia, may intensify their soybean shipments to China in case of any U.S. deliveries' disruption," she added.

The trade conflict is also a chance for to boost supplies of its corn to the European Union, which imposed a 25 percent import duty on U.S. corn in June, Malysh said.

China can also turn to and for corn in case it reduces purchases from the United States, according to Matt Ammermann, with

(Additional reporting by and Natalia Zinets; Editing by and Dale Hudson)

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

First Published: Tue, July 10 2018. 23:01 IST
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