ANALYSIS - Argentina confident about soybean sales to China
Date: 28-Sep-01
Country: ARGENTINA
Author: Damian Wroclavsky
"With the amount China consumes, it can't enjoy the luxury of putting these types of policies in place. It is a momentary change. Seventy percent of world production is transgenic and I don't know how they would be able to subsist," said a trader at a local unit of a major international grain company.
Still, lack of definition about the reach of new inspection rules China began to apply to transgenic grains and oilseeds 10 days ago has led to confusion in Argentina, which is second only to the United States in production of genetically modified grains and oilseeds.
Separating traditional crops from transgenic crops is becoming more and more difficult because of the large quantity of genetically modified material produced, traders said.
"China would have to be prepared to pay a high premium to get traditional products to cover their needs, but I don't think they are willing to do that," said an international broker.
The move comes after news the Chinese government recently recommended that its major buyers think twice before buying large amounts of soybeans abroad.
"There are ships that are being delayed and I know that importers are being charged fines for the delays, but everything is very confused and it is not known how far the rules on transgenic products are going to go," said a Buenos Aires-based trader at an major international grain company.
CHINA IN COMMAND
China has changed in recent years from a large importer of soybean meal and soybean oil into a major importer of unprocessed soybeans, as part of a bid to develop its local processing industry. Argentina is one of its biggest providers of the oilseed.
Argentina's soybean export season begins in April.
"From April 1 to today, one Argentine ship has left for China each day of the work week," said Daniel Miro, an analyst at Novitas consultancy.
Even a small disruption in the soy trade between Argentina and China could cause major problems.
Argentina is expected to export about 6.7 million tonnes of unprocessed soy in 2000/01, compared with 4.13 million a year ago, according to the U.S. Department of Agriculture (USDA).
A good part of those exports are expected to go to China, which the USDA forecast will import 13.2 million tonnes of the oilseed.
Argentina, where 90 percent of the soy crop is transgenic, exported nearly $4 billion worth of soybeans, soybean oil and soybean meal in 2000.
China's new policy is sure to cause concern in Argentina in the short term.
"It's worrying because the Chinese buyers are not appearing in the market; they are not buying, which puts pressure on the Chicago (futures market) at a time when they are collecting what will be a rather large harvest in the United States, and that is pushing prices down," said a trader.
Soybeans for export traded at $180 per tonne FOB in Argentina this week.