Chinese importers closed contracts to buy 720,000 metric tons of U.S. soybeans — most of it for new crop — according to a USDA announcement Thursday, signaling the country is calculating the growing tightness of Brazilian supplies and locking in deliveries past September.

“What they’re doing is booking some for this year, but I think Chinese companies intend to buy from the U.S. almost exclusively during September, October, November and December,” says John Baize, an analyst with the U.S. Soybean Export Council.

Only about 63,000 tons of the total is for delivery in the 2019-20 marketing year, while the remaining 657,000 tons is for delivery in 2020-21, which begins Sept. 1.

“I expected sales to be announced this morning,” Baize said. “I was surprised by the amount. It’s substantial. That’s a lot to be purchased at one time.”

The size of the new crop contracts is an indication that the sales were likely made to state-owned companies like COFCO or Sinograin, says Baize. Private buyers are still nervous about the fate of the U.S.-China “phase one” trade pact amid growing tensions and are still more likely to rely on South American soybeans because there’s no risk of tariffs.

China, in a move tied to the “phase one" deal, began waiving trade war tariffs for importers to buy soybeans and other U.S. commodities.

Those waivers are key to future sales and were necessary for recent sales, which are substantial. USDA announced several daily soybean sales last week. Only one was directly attributed to China. The rest, for about 1 million tons, were labeled as going to “unknown destinations,” but it’s widely believed they will be going to China.

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