Beijing halts nearly all purchases from Argentina, as domestical processing of crop rises

China has halted its soy oil purchases from Argentina, raising concerns over the future of one of the country’s main exports, soy-based products. According to sources in the sector, exports of soy oil to Beijing have plunged in 2016 so far, though other sales of other soybean products continue.

Despite having imported 280 million tons of soy oil between January and July earlier this year, almost none of them came from our country, with Asia’s giant increasing purchases from Ukraine and Russia instead, according to data from the Argentine Embassy in Beijing.

Government sources quoted by the Noticias Argentinas news agency reported that soy oil exports to China plunged by 97 percent this year, while the embassy itself told DyN that “during this period there were no imports registered from Argentina.” The country is still selling much bigger amounts of soybean and other soy-based products to China.

While China has not given any explanation for the decision, sources in the Argentine business community said they believed it could be linked to President Mauricio Macri’s government’s decision to freeze and renegotiate the contracts for the infrastructure works planned with China in Santa Cruz province during the past administration. No official confirmation of this version was given by any of the parts involved.

This would not be the first time in which China decides to cut soy oil imports from the country, as the People’s Republic also did so in 2010 in response to “anti-dumping” measures implemented by the Cristina Fernández de Kirchner government at the time.

According to the Executive Director of the Argentine-Chinese chamber Ernesto Fernández Taboada, soy oil imports plunged due to a Chinese decision to favour local manufacturing over buying the processed product.

“China is privileging imports of soybeans to feed its own oil production facilities, and this is why purchases of the manufactured product have gone down, and they will continue to do so,” he told NA.

China has so far purchased 279 million tons of soy oil from different countries this year, down by 24 percent overall when compared to the year before.

But Argentina has led the decline, with other countries doing much better in terms of sales.

Brazil sold China 59 percent of its produce, with 165 million tons, while Russia and Ukraine even improved their sales.

Argentina, on the other hand, saw its soy oil exports plunge from 525 million tons in 2015, when it was the main provider of soy oil to China with 65 percent of the market.

Sources close to Argentina’s agricultural sector, however, said there were alternative markets to sell the product to.

So far this year, soy oil exports from Argentina have focused on India as the main market, with 53 percent of total sales to the second-highest populated country in the world. Egypt, Peru, Bangladesh, Algeria and Iran have also been buyers of local soy oil this year.

China is the world’s largest soy purchaser in the world and its massive demand over the last few years has been key to boosting the economy of exporting countries such as Argentina and Brazil. Other commodities demanded by the growing Chinese economy have also boosted other Latin American countries.

Demand for soybean per se would not necessarilly be affected by decisions on soy oil.

Date: October 7, 2016