October 15, 2010

 

China soyoil demand may boost Argentina's soy

The end to China's six-month boycott of Argentine soyoil shipments could spur farmers to plant more soy in the South American country, as prices for soyoil rise.

 

China, the world's largest soyoil buyer, halted shipments from major global exporter Argentina in late March in apparent retaliation for Argentine anti-dumping measures applied to some Chinese manufactured goods.

 

The spat forced exporters in Argentina to secure new, less-lucrative markets such as India. Reopening the Asian giant's market should help exporters and farmers earn more and boost government revenue from hefty taxes on farm exports.

 

"China's lifting of the ban is positive and could boost (Argentine) area planted with the crop," said Ricardo Baccarin, an analyst for consulting firm Panagricola.

 

According to government estimates, Argentina's 2010/11 soy area is seen at 18 million hectares whereas the Buenos Aires Grains Exchange foresees area of 18.7 million hectares. Farmers have just started sowing 2010/11 soy.

 

Baccarin added that farmers would likely start growing soy on cattling-ranching lands, since shifting from corn to soy makes less sense with corn prices also on the rise.

 

Soy is Argentina's biggest crop. The USDA sees Argentina's 2010/11 harvest totaling 50 million tonnes, below last season's 54.50 million tonnes. The agriculture minister has forecast a crop of 52 million tonnes.

 

"China's decision is a factor that will lift prices and be an extra incentive for soy. With Chinese demand resurfacing, crushers will be able to pay better prices and this will encourage farmers to sell soy" stocks that they are holding back, said Gustavo Lopez, head of agricultural consulting firm Agritrend.

 

The trade row between the two countries prompted China to halt soyoil shipments from Argentina, ostensibly to enforce tough quality standards.

 

The ban led China's soyoil imports to fall nearly 60% in the first eight months of the year to 595,140 tonnes and pushed up domestic prices of the edible oil at a time of peak consumption.

 

Beijing is concerned about rising food prices as soy prices have surged on the CBOT. China has increased soy imports to help offset a soyoil deficit.

 

An Argentine industry source said China's resumption of imports has boosted Argentine soyoil prices, now nearing the levels seen in Brazil, a main global competitor.

 

Traders in Rosario-Argentina's main grains exchange-said the nearest shipment of Argentine soyoil was traded on Tuesday (Oct 12) at US$1,024 per tonne, under the US$1,037 per tonne paid for Brazilian soyoil.

 

"Argentine soyoil prices are still below those of Brazil as they've always been but the gap is narrower. We're going back to normal prices," said Lorena D'Angelo, an analyst at the Rosario grains exchange.

 

Agritrend's Lopez expects Argentine soy prices to stay at between US$1,080 and US$1,100.

 

Global soyoil supplies are being squeezed because of rising biofuels production, which is set to keep prices high during the coming month, Oil World magazine said recently.

 

Lopez sees Argentine 2009/10 soyoil output slightly above seven million tonnes, with two million tonnes being used for biofuels and another three million already exported.