May 18, 2004

 

 

China Soy Crusher Comments Viewed Negatively In Argentina

 

An apparent decision by 16 of China's largest soybean crushers to crimp soy imports this year is likely to have a negative impact on Argentina, traders said Monday.

 

China imports more than 20 million metric tons of soybeans annually, giving it a sizeable influence over the formation of prices in global commodities markets.

 

Argentina exported 9.48 million tons of soybeans in 2003, according to the government agency Senasa, which certifies exports. About two-thirds of this amount went to China.

 

"If this actually materializes, it would be bad news not only for Argentina but also for the U.S.," said Ricardo Baccarin, a trader with Buenos Aires-based Panagricola.

 

CHINESE CRUSHERS

 

China imports huge quantities of soybeans from Argentina, Brazil and the U.S. each year to meet the demand of the country's domestic crushers.

 

China's 16 largest soy crushers had met the previous day in Beijing and decided to combat expensive soybean imports.

 

The 16 crushers, who account for over half of China's 60-million-ton-a- year soy crushing capacity, will reportedly coordinate the pace of future imports and share existing stocks among themselves.

 

Moreover, the crushers agreed to delay and wash out "arrivals in the second quarter as much as possible," while "slashing import orders in the second half of this year." Wash out refers to the breaching of contracts.

 

IMPACT ON ARGENTINA

 

"Obviously, if a country that imports 21 million tons of soy each year decides to slow imports, it's going to be bad news for the market," said Baccarin.

 

Still, traders cautioned that the news out of China could be little more a ploy by crushers to keep prices down.

 

"At first, this will take away the potential for an increase in soy prices; it will be a negative for the market," said Carlos Boglioli of the Rosario-based brokerage Roagro. "On the other hand, the market considers these commentaries with a certain amount of caution. This is not the first time China has done something like this. We'll have to if they actually follow up."

 

In addition, market participants have already been expecting China to slow its imports as the country's economic growth cools down. Moreover, soybean prices have been declining recently because of a host of factors.

 

"There are many pieces of news that are affecting prices now and China is only one of these," said Baccarin.

 

Any measurable decrease in soybean prices would be negative not only for Argentine farmers but also for the federal government, which depends heavily on exports taxes to meet its revenue targets.

 

Soybean exports, which totaled $1.967 billion last year, face a tax of 23.5%.

 

China plays a pivotal role in Argentina's exports. In 2003, China was the single biggest buyer of Argentine agricultural products.

 

Last year alone, China bought $2.26 billion worth of goods and absorbed around 15% of Argentina's agricultural exports, according to the Inter-American Institute of Agricultural Cooperation, or IIAC.

 

Cash soybeans traded for 590 pesos ($1=ARS2.91) in Rosario on Friday, down ARS60 from the previous day.