CHINESE buyers of soybeans, the United States’ biggest agricultural export to the country, are quietly drawing up contingency plans to ensure supplies of critical raw materials in the event of a trade war, sources said.

The moves are the strongest sign yet that businesses in China are growing worried that critical commodities could get caught up in escalating trade tensions.

At least two trading houses have started buying more rapeseed meal, an alternative ingredient used to make animal feed, in case the oilseed is a target of retaliation by China, sources at the company familiar with the strategies said.

“It is an obvious choice to seek other protein sources. We are buying more rapeseed meal, for example,” said one of the sources.

As an extra layer of protection, his company has also started to include exit clauses in purchasing contracts with U.S. suppliers, giving them the right to cancel the order if needed.

The second source said their firm was also purchasing more domestic distillers’ dried grains (DDGS), a byproduct of ethanol production used as an animal feed ingredient.

The company is also considering ramping up purchases of Brazilian soybeans.

The sources declined to be named as they are not authorized to speak to the media and would not disclose further details due to the commercial sensitivity of the issue.

It is widely believed penalties on soybeans would be a powerful weapon in China’s retaliation because they would especially hurt Iowa, a state that backed U.S. President Donald Trump in the 2016 presidential elections. U.S. Ambassador to China Terry Branstad was previously a long-serving governor of the farm state.

The United States shipped more than US$12 billion worth of soybeans to China last year. China buys two-thirds of the beans traded worldwide, mainly from Brazil and the United States.

China’s commerce and agriculture ministries told a delegation of U.S. soy growers last September that soybeans were being considered as a target for retaliatory action in the event of U.S. trade action against Beijing.

The threat of a trade war drove up prices for soymeal, hurting feedmakers and pig farmers, on Friday. The most-active soymeal futures prices on the Dalian Commodity Exchange were up 1.4 percent at 3,046 yuan (US$486) per ton.

Traders and millers who crush soybeans and rapeseed to make meal and oil in China say there are no signs of panic in the country’s vast farming and livestock sector. (SD-Agencies)