The deal is to be formalized today [September 11] by Argentina’s Minister for Agriculture, Luis Miguel Etchevehere, and the Chinese ambassador to Argentina, Zou Xiaoli.
Argentina is the biggest supplier of soybean meal (SBM) and soybean oil globally. It is expected to export a total of 26 million tons of SBM worldwide in 2019, as per data released in the ministry's statement yesterday.
China, prior to this agreement, had refused to import from Argentina in order to protect its domestic crushing industry. However, the tariff tiff with the US has prompted Beijing to see new trading partners.
Argentina has been negotiating with the Asian behemoth in this respect for 20 years. Chinese officials visited Argentina's soybean meal crushing plants last month.
It won’t be an instant fix though as there are still some bureaucratic obstacles to overcome.
Gustavo Idigoras, head of crop export and crushing chamber Ciara-Cec, told Bloomberg that Argentina’s crushing plants still require approval from China, likely to happen next month, and meal from Argentina has to be included on China’s customs register, which could take five months.
The opening up of the Chinese market for their SBM is a massive boost for Argentina’s crushers. Idle capacity has increased to more than 50%, Idigoras told that publication.
Profit margins have been hit because of rising bean prices and a change last year in Argentina’s tax system that makes exporting raw beans more competitive, as per Bloomberg.
In the past year, China has been increasingly buying soybeans from Brazil, after Beijing imposed a 25% tariff on US soybeans in its trade war with Washington.
Soybean meal is a key ingredient in animal feed, largely used in pork and poultry production in China. However, the outbreak of African Swine Fever (ASF) in China has tempered pig feed demand there this year.