March 28, 2008
Brazil to gain China soy market as Argentine exports halt
Brazil is poised to tap on China for additional soy trade as Argentina halted shipments after farmers staged protests and paralyzed grain and livestock markets, a scenario seen to create shortages in China if unabated.
Recently, Argentina farmers blocked roads and disrupted trading markets as a sign of protest to the government's increased export tariffs specifically for soy and sunflower.
Argentina, the third largest soy exporter after the US and Brazil, declared force majeure and cancelled shipments of up to 1 million tonnes of soy and soyoil to China.
Sergio Mendes, director of Brazil's National Grain Exporters Association, told Reuters that it may be too early to announce Brazil's benefit from this, but the situation would become clearer in a week or two.
Mendes pointed that China could face food shortages and would have to turn to other suppliers if Argentina protests persist.
Argentine president Cristina Fernandez held steadfast to the new tax increase on grain exports.
Fabio Turquino Barros, manager of agro-energy at FNP analyst, said Brazil, which is China's top supplier of soy, would gain market share from Argentina and keep it if Argentine shipments remain suspended.
Barros added that Brazil could also directly benefit from extra Chinese and European demand for meal and oil, but that Argentina was much more competitive in that sector and would likely regain its position once the unrest settles and shipments resume.
China has to import around 2 million tonnes of soy every month to meet its burgeoning local demand. It has already switched some Argentine shipments to US suppliers.
So far, Brazil has not received any new soy order from China, a manager of a multinational grain trader in Sao Paulo said.
Steve Cachia, a soy specialist at grains trader Cerealpar in Parana state, said that the US already benefited from the Argentine export crisis, yet the direction for Brazil is still unclear.
