March 2, 2012

 

 

Even though the countries reached an initial trade deal this month, Argentina is unlikely to sell much corn to China, as industry sources say the accord leaves too much room for China to reject shipments.

 

Argentine corn farmers are eager for access to China, whose growing economy has fuelled an upsurge in global commodities demand. China is already a key market for Argentine soy and soyoil but the big Asian consumer prohibits many of the genetically modified corn strains produced in the South American country.

 

On February 15 Argentina's farm minister announced agreement on "a protocol through which all the derivatives of our corn can enter the Chinese market, which was not the case previously."

 

The document did not specify which corn varieties would have access to China, however. So each corn shipment to China will depend on approval being granted at the receiving port, and Argentine exporters consider that system risky.

 

Argentine authorities say they expect their Chinese counterparts to approve corn shipments for entry, but Argentina-based exporters are not so sure.

 

"There is a lot of uncertainty involved in sending shipments to China," said a source in Argentina's export sector, who asked not to be named.

 

Different corn varieties "are mixed in each shipment," the source added, "so if one grain of GM corn not permitted by China appears at the receiving port, the whole shipment might be rejected."

 

Exporters and producers in Argentina often decline to speak on the record about the country's policies, citing their wish to avoid problems with the government of President Cristina Fernandez, who has had a rocky relationship with the agricultural sector during more than four years in office.

 

"I don't think anyone will risk sending corn to China under these rules," a source at an exporting company told Reuters. "It's practically impossible to export because they could reject the ship."

 

Argentina is the world's No. two corn exporter after the US and the No. three supplier of soy, a major source of protein for an increasingly hungry world. As global population grows to an estimated nine billion by 2050, demand for food will nearly double, according to the UN. Argentina, with its vast and fertile Pampas plains, will be a key to meeting that demand.

 

Chinese corn imports, mostly from the US, have grown to more than three million tonnes in 2011 and may keep growing in the years ahead, depending on the rate of China's overall economic expansion.

 

"There is a gray area that remains between Argentina and China," a grains trader at an international firm said. "Everything depends on the flexibility that the Chinese authorities may or may not have when Argentine corn arrives at their ports."

 

"Corn consumption is growing in China and its harvest won't be enough ... when they need Argentine corn, the Chinese authorities will be more flexible," the trader said.

 

Argentine Agriculture Secretary Lorenzo Basso says worries over the corn sales are exaggerated. The protocal, he said, is very similar to that governing imports of US corn to China.

 

"We do not believe that there will be problems as long as, before sending the shipment, China agrees to receive the material," Basso told Reuters.

 

"Every shipment will have to be checked this way," he added. "The Chinese government has the power to stop corn from entering the country, according to its policy of the moment."

 

The protocol does not mention the subject of the genetically modified (GM) crop varieties that are widely popular among Argentine farmers, "but that does not mean there will be impediments to exporting them," Basso said.

 

Argentine farmers have finished planting the 2011/12 soy and corn crops, both of which suffered from a drought earlier in the season, the government said on Friday. The Argentine government forecasts 2011/12 corn output of between 20.5-22 million tonnes, and soy production of 43.5-45 million tonnes.