-->UPDATE - China restricts soybean imports - trade sources
Thursday August 7, 4:28 pm ET
By K.T. Arasu


(Recasts first paragraph, adds analyst's comments)
CHICAGO, Aug 7 (Reuters) - China on Thursday slapped restrictions on soybean imports from the United States, Brazil and Argentina, in what U.S. grain traders said could potentially escalate into a heated trade row.


The action by China, the world's top soybean importer, which buys about $1 billion worth of soy from the United States each year, is aimed at putting the brakes on a deluge of soy imports and keeping its domestic prices stable, the traders added.

"This is new ground for all us," said grains analyst Dan Basse, president of research firm AgResource Company, reflecting the uncertainty among U.S. traders over the restrictions.

He said Beijing was attempting to slow the import of record large crops from the United States, Brazil and Argentina -- the world's top three exporters -- from driving down soy prices in China and financially affecting legions of its farmers.

Basse said the restrictions would in part require Chinese processors to arrange for vessels to ship some of the soybeans they buy, something that is presently handled by the exporters, and an element that would take time for them to learn.

"It's much harder for a Chinese importer to get all this done without the help of a multinational," he added.

The restrictions follow a surge in soybean imports by Chinese processors, both from South America and the United States, grain traders said.

For more than a month until this week, China has been delaying issuing import permits to several vessels, leaving them stranded and unable to unload their cargoes.

Traders said several companies could be affected by the restrictions, including Bunge Ltd. (NYSE:BG - News), the world's No. 1 oilseed processor and a major shipper of soybeans to China.

Bunge spokesman Hunter Smith said China's imposition of the restrictions was conveyed to the firm through the agriculture attache in the Beijing office of the U.S. Department of Agriculture on Thursday.

"They informed the ag attache, and we were informed by the ag attache," Smith told Reuters.

He said China cited quality issues for the restrictions, but it did not give details.

Earlier, traders said there was talk of several companies being placed on a"blacklist" by China, effectively preventing them from shipping soybeans to the country for an unspecified period due to problems with the quality of soybeans.

Traders said there was talk that Cargill (News - Websites)Inc., the world's top grain exporter, would be restricted from shipping soybeans from Brazil, but not from the United States and Argentina.

They said Hamburg, Germany-based Alfred C. Toepfer International, 80 percent owned by Archer Daniels Midland Co. (NYSE:ADM - News), and Noble Trading would be restricted in Argentina.

The traders said soybean shipments from the United States would be restricted for Bunge, Louis Dreyfus and Toepfer.

Kevin Kaufman, senior vice president of Louis Dreyfus, said he had no knowledge of the restrictions. Representatives of Cargill and ADM could not be immediately reached.

"They put the six major importers on some kind of blacklist charging quality issues," a CBOT trader said.

Bunge's Smith said the company had been informed that it would not be allowed to ship soybeans to China from the United States on a cost-and-freight basis. He said, however, Bunge could ship on a free-on-board basis, which means the Chinese importer has to make the arrangements to ship the cargo.