China allows first US rice imports ahead of talks

China opened its rice market when it joined the World Trade Organization in 2001. (Reuters)
Updated 29 December 2018
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China allows first US rice imports ahead of talks

BEIJING: China has opened the door to imports of rice from the US for the first time in what analysts took to signal a warming of relations between the world’s two biggest economies after a frosty year marked by tensions and tit-for-tat tariffs.

The green light from Chinese customs, indicated in a statement posted on the customs authority’s website, comes in the run-up to talks between the countries in January after US President Donald Trump and Chinese President Xi Jinping agreed to a moratorium on higher tariffs that would affect trade worth hundreds of billions of dollars.

It was not immediately clear how much rice China, which imports rice from within Asia, might seek to buy from the US. But the move, which comes after years of talks on the matter, follows pledges from China’s commerce ministry earlier this week of further US trade openings.

“I wouldn’t be surprised to see importers trying to move rice into China from California but I don’t know if it will be in breathtaking quantities right away,” said Stuart Hoetger, an analyst and rice trader based in California.

As of Dec. 27, imports of brown rice, polished rice and crushed rice from the United States are now permitted, as long as cargoes meet China’s inspection standards and are registered with the US Department of Agriculture.

The USDA on Dec. 11 forecast US rice production at 6.93 million tons while Chinese rice imports were estimated at 5 million tons. Rice makes up only a small portion of US agricultural exports, which are dominated by shipments of soybeans, grain, tree nuts and meat.

“The permission for US rice suggests an improving US and China relationship,” said Cherry Zhang, an agriculture analyst with consultancy JCI. Zhang said she expected any imports would likely be ordered by state-owned companies.

Officials at a government-affiliated think tank in Beijing said the price of US rice was not competitive, compared with imports from South Asia, and said the move to formally permit imports from the US should be interpreted as a goodwill gesture.

China opened its rice market when it joined the World Trade Organization in 2001, but a lack of phytosanitary protocol between China and the US effectively banned imports, according to trade group USA Rice.

Nonetheless, in July China formally imposed additional tariffs of 25 percent on US rice, even though imports were not permitted at
the time. 


Energy Recap: The oil market wavers

Updated 22 min 24 sec ago
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Energy Recap: The oil market wavers

RIYADH: Oil prices went in different directions at the end of the week. Brent deteriorated to $67.03 per barrel and WTI rose to $59.04 per barrel, but both remain at four-month highs. 
Still, poor economic signals that added to the generally bearish mood did not manage to drive oil prices down because of the tightening global supplies that led the surprise drawdown in US inventories.
The 10 million barrels fall in US crude stocks was the largest drop since July 2018, due to a combination of strong exports and higher refining utilization. 
The reduced number of US oil rigs for a fourth week running sent drilling activity to its lowest in nearly a year.
The current level of oil prices does not reflect the market’s relatively strong fundamentals and supply tightness.
The Arabian Gulf sour crude grades have seen extensive buying activity with refiners securing spot cargoes in addition to their term cargoes.
Such high demand for the sour medium and heavy crude grades had Dubai crude in high demand.
Asian refiners are becoming increasingly concerned about the tightening supplies for the medium and heavy crude grade.
That is because many of them lack the flexibility to swiftly switch their refining systems to handle alternative light sweet crude grades that have low sulfur content. 
The market remains preoccupied with Iranian sanction waivers, which may be extended for another round of six months.
Given the tight oil market that has been further exacerbated by the sanctions on Venezuela, the second half of this year might experience further tightening.
The US is widely expected to continue extending the waivers for the key importing countries which are China, India, Korea and Japan. 
The a potential second round of waivers may not impact the market as much as last time in November 2018 when the price dropped by as much as $30 per barrel.
Helped by OPEC output cuts, the market has been stabilizing gradually even if not entirely recovering those early losses.
The current market appears too tight to be moved significantly by further waivers and should be able to absorb additional barrels — be they from Iran, Venezuela, Libya or the US.
Even with the last round of waivers, Iranian oil exports did not exceed 1.25 million barrels per day in February.

  • Faisal Mrza is an energy and oil market adviser. He was formerly with OPEC and Saudi Aramco. Reach him on Twitter: @faisalmrza