Argentina lands first soymeal shipment to China, but wider access uncertain

Argentina's grains hub town of San Lorenzo, on the banks of the Paraná River, is readying to send a key cargo to China: the first ever shipment of some 30,000 tons of soymeal from the world's largest exporter of the animal feed.

The shipment, reported by Reuters on Monday, has stirred excitement in the sector. It would link for the first time the world's top supplier with the top consumer, which crushes almost all its own meal for its huge hog herd and imports very little.

However, analysts cautioned that the single cargo is like a drop in the ocean for China, and there were major headwinds before it could be turned into a meaningful trade. Still, it was a positive step since Beijing approved Argentine meal imports in 2019.

"If they're buying from Argentina, it's a good sign," analyst Lorena D'Angelo based in farm hub city Rosario told Reuters. "However, it's more political than market-related."

China, locked in a trade war with major soybean supplier the US, is looking to diversify its supply options, but that could change quickly depending on trade talks. China also has huge crushing capacity and strongly favors processing soybeans itself rather than buying finished meal.

"I don't see it becoming an important market this year," said D'Angelo, who added that in recent years China had imported a total of only 50,000 tons of soymeal. For comparison, China imports over 100 million tons of uncrushed soybeans per year.

Trade opening?

Julio Calzada, director of economic studies at the BCR grains exchange in Rosario, also signaled caution. Calzada noted that China's annual soybean milling capacity is 153.5 million tons, more than twice as big as Argentina's.

"There are doubts in the sector regarding the future likelihood of continuing to place Argentine soybean meal in China, given that China has many crushing plants," he said.

Argentina last year shipped a total 27.2 million tons of soymeal worth some $10.55 billion, though its cost-efficient crushing plants along the Paraná are facing rising competition from Brazil and the United States.

The country's chamber of grain exporters and processors CIARA-CEC still celebrated on Monday the expected arrival in mid-July of the Nordtajo cargo vessel at Terminal 6 port in San Lorenzo, jointly operated by Bunge and the local firm AGD.

That ship would take the maiden Argentina soymeal shipment to China, arriving likely in September. Within the local industry people are still watching hopefully, to see if the cargo is actually allowed in by Chinese customs.

"It's a very important shipment...because it implies a real and effective trade opening," CIARA-CEC president Gustavo Idígoras told Reuters. "This should allow for a permanent flow in the future."

(Reporting by Maximilian Heath; Editing by Adam Jourdan and David Gregorio)