BUENOS AIRES: Argentine soy crushing factories want to revive their business with a deal permitting them for the first time to export soymeal livestock feed to China, a pact that the government said was being hammered out this week in Beijing.
The crushing plants that dot the banks of the Parana River, Argentina's main grains thoroughfare, are working at only about half their capacity due to fallout from the US-China trade war. The government hopes to announce the soymeal-to-China agreement at the G20 meeting in Buenos Aires later this month, the head of the local grains exporting chamber said on Tuesday.
The country's agriculture chief Luis Etchevehere is in Beijing this week, trying to settle the deal.
Argentina, long the world's top exporter of soymeal, is one of the country's damaged by the US-China conflict, which has shifted global commodity trade routes and distorted prices.
Beijing has slapped a 25 percent tariff on US soybean imports, effectively halting soybean shipments to China. The resulting glut of cheap soy in the United States has lowered input costs for US meal crushing factories, making them more profitable. US soymeal exports have soared to a record high, topping 12 million tonnes in the most recent marketing season, according to the US Department of Agriculture.
This has hit the soy meal manufacturing industry in Argentina, already reeling from a drought on the Pampas farm belt that dried up soybean supplies earlier this year.
"We expect the permission to export soymeal to China will be granted before the end of this year," Gustavo Idigoras, president of the CIARA-CEC chamber of grains exporter and soy crushing companies, told Reuters in an interview.
The opening of China to Argentine meal would be a boon to the South American country, whose large processing plants located between the Pampas and the deep-water ports of the Parana make it the world's most efficient place to crush soy.
China has long relied on imports of whole soybeans to be crushed locally into meal and cooking oil, instead of importing the end products themselves as this protects jobs in China's food-processing industry.
But while cut off from US soybeans due to the trade war, Chinese authorities are looking for ways to ensure a steady supply of feed for the country's massive pork sector.
Argentine officials have been working to "finalize" a deal with China, the world's largest hog and pork producer, since at least August.
A government spokesperson confirmed Etchevehere was in China this week, and that the pact was expected to be signed soon.
Argentina will host US President Donald Trump and Chinese President Xi Jinping at the G20 leaders meeting starting on November 30.
"The Argentine government's objective is to have the export license before the arrival of the president of China in Argentina. If not, then to announce that the license has been granted during the G20," Idigoras said.
Argentina is expected to export 16 million tonnes of soybeans to China, Idigoras said, a record volume if realized.
If the US-China trade dispute is resolved, he said he expects Argentina bean shipments to China to return to a normal amount of about 7 million tonnes.
This year exports were chopped to 4 million tonnes by a the months-long drought that baked the Pampas early this year.
As a result, Argentina has imported one million tonnes of soybeans from the United States, Idigoras said, marking the first time in 20 years that Argentina has imported US beans.
The amount of US soybeans imported by Argentina is projected to grow to more than 2 million in 2019 if the trade war continues, he added. If the trade war ends, he said the amount of US soy imported to Argentina should go back to zero.
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