BEIJING/CHICAGO (Reuters) - China dropped its anti-dumping probe into imports of U.S. sorghum on Friday, beating a hasty retreat from a dispute that wreaked havoc across the global grain market and raised concerns about rising costs and financial damage at home.

A field of sorghum (milo) grain is seen at a farm outside of Texhoma, Oklahoma, U.S., in this undated photo released to Reuters on April 3, 2018. Courtesy Jerod McDaniel/Handout via REUTERS

The move was seen as a goodwill concession as Chinese Vice Premier Liu He was in Washington for talks aimed at resolving trade tensions between the world’s two largest economies.

The end of the investigation came as a huge relief to U.S. sorghum growers, who saw sales to the top grain buyer come to a halt and prices plummet over the past month.

But U.S. farmers and traders said they remained worried that China might still implement restrictions and tariffs on other agricultural products such as soybeans, corn and cotton.

Tensions between the nations have climbed. U.S. President Donald Trump has threatened to impose up to $150 billion in punitive tariffs to lower trade deficits and combat what he calls Beijing’s misappropriation of American technology.

China has threatened equal retaliation, including tariffs on some of its largest U.S. imports including aircraft, soybeans and autos.

China’s Commerce Ministry said in a statement the investigation into sorghum, used in animal feed and liquor, had revealed that anti-dumping and anti-subsidies penalties would inflate living costs for Chinese consumers.

China’s investigation, launched in early February, showed its top trading partner how much financial pain it could inflict on U.S. farmers, analysts said. Last month, Beijing imposed hefty anti-dumping deposits on imports of the grain.

“China has taught a lesson to the United States and showed how it can hurt U.S. exports,” said Ole Houe, director of advisory services at brokerage IKON Commodities in Sydney.

“Now they are showing goodwill by halting its anti-dumping investigation into sorghum imports, but it is a cheap way of showing goodwill as the U.S. does not have much sorghum left to export. The next U.S. sorghum crop will be harvested in August.”

Agricultural products are considered one of the most powerful weapons in Beijing’s arsenal because a strike against farm exports to China would hurt farmers in U.S. Midwestern states that backed Trump in the 2016 presidential election.

The United States accounts for more than 90 percent of total sorghum shipments to China, with the American imports worth just over $1 billion last year.

Most of Archer Daniels Midland Co’s sorghum shipments to China have already been diverted and resold to other markets, said Jackie Anderson, a spokeswoman for the agricultural trader.

The company warned earlier this month it would take a $30 million hit to trading profit due to the dispute.

“We are continuing to evaluate the impact of these developments on our business going forward,” Anderson said on Friday.

HOPES FOR TRADE AGREEMENT

The National Sorghum Producers, a U.S. industry trade group, submitted thousands of pages of information to China’s authorities to show that the United States was not dumping sorghum, the group’s Chairman Don Bloss said.

Bloss said he hoped the end of the probe reflects an easing of trade tensions with Beijing.

The deposit scheme stopped trade and disrupted supply chains worldwide, with almost two dozen ships carrying U.S. sorghum stranded at sea as merchants and buyers scrambled to sell cargoes at big discounts elsewhere.

Frantic Chinese importers lobbied the government to rethink the plan amid worries that higher costs would be passed onto feedmakers and eventually push retail meat prices higher.

Corn, soybean and soymeal futures in China fell on the news of the end of the probe as concerns eased that feedmakers would need to find alternative ingredients.

In the United States, corn futures jumped as traders said the move signaled that supplies of livestock feed would tighten. U.S. soybean futures rose on hopes that the end of the probe is a step toward a broader trade agreement.

Dropping the probe “is an important sign of progress in our efforts to resolve trade tension with China,” Kansas Governor Jeff Colyer said in a statement.

China’s Commerce ministry said it would return the deposits on sorghum imports it collected, bringing relief to Chinese buyers who still had cargoes stuck at ports.

“This is great news! We are now saved,” said a private sorghum trader who had more than 600 tonnes of U.S. sorghum stranded at a Chinese port. “We will clear our goods immediately today.”

The government would not, however, compensate traders for losses linked to reselling or demurrage, said Cherry Zhang, analyst at Shanghai JC Intelligence Co Ltd.

“The damage has been done, and mainly to the domestic buyer,” Zhang said.

The United States shipped 4.76 million tonnes of sorghum to China in 2017, worth around $1.1 billion and making up the bulk of China’s roughly 5 million tonnes of imports of the grain last year, according to Chinese customs data.