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[Markets] Huge Blow To US Farmers: China Heads To Argentina For Soy Meal In Landmark Deal Huge Blow To US Farmers: China Heads To Argentina For Soy Meal In Landmark Deal

News for US farmers gets worse by the week. From collapsing farm incomes to plunging crop exports to China, the trade war has likely ushered in the next farm crisis, set to explode across the Central and Midwest US next year. 

A new report from Reuters outlines how China has ditched US farmers for Argentina. An agreement between both countries is expected to be signed on Wednesday in Buenos Aires, describes how Argentina, the world's biggest exporter of the animal feed, will allow China to import soy meal for the first time. 

Last month Chinese officials examined several Argentine soy meal companies ahead of the signing ceremony on Wednesday. 

Argentina's Agriculture Ministry said in a statement on Tuesday that after two decades of discussions, the Asian giant will begin imports of soy meal in the near term.

The deciding factor for the landmark deal was the US-China trade war, which strengthened Argentina's hand after China halted all US agriculture product imports this summer, prompting China to source more agriculture products from South America. 

"This is a historic agreement," Gustavo Idigoras, president of Argentina's CIARA-CEC chamber of grains exporting companies told Reuters, though he added the deal still required a two-step process of plant authorizations and then registrations that could take several more months.

Idigoras said, "shipments aren't expected to start immediately," but could start in the near term. China still has some bureaucratic bottlenecks before cargoes can set sail, he added. 

In a separate report last month, China is preparing a bid that would allow it to dredge Argentina's Parana River, the country's only river that acts as a waterway for bulk vessels that transport soybean and corn from the Pampas farm belt to the South Atlantic.

An increased waterway would allow China to create a grain superhighway in Argentina that would effectively be able to replace US farmers. 

Argentina, already the top exporter of processed soy, is expected to export 26 million tons of soy meal this year worldwide, and 8.5 million tons of raw beans. 

"It is excellent and timely news. Argentina needs to add more value to its exports to China and the world," said Luis Zubizarreta, president of Argentina's ACSOJA soy industry organization that represents farmers.

Allowing China to buy from Argentine farmers would tremendously boost exports next year. China has come at the right time, considering profit margins have been falling, and idle capacity has increased to more than 50%.

China has been busy in South America. They've been building massive infrastructure projects across Argentina, from hydroelectric plants to railways.

Business-friendly President Mauricio Macri has said the new partnership with China would boost the country's agricultural sector and create enormous opportunities for farmers. 

While boom times are here for Argentine farmers, a bust cycle is imminent for US farmers who are on the brink of collapse after being shut out of China thanks to President Trump's trade policies. 

Tyler Durden Wed, 09/11/2019 - 23:45
Published:9/11/2019 11:05:46 PM
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