China reassures Argentina over soy

- Last updated on GMT

Related tags: Brazil, China

China has reassured Argentine soy producers that it will continue
to buy its soy, after the producers started to show signs of
nervousness in reaction to trade agreements signed last week with
the Brazilian government and Brazilian soy producers.

Chinese Trade Minister Bo Xilai confirmed that his country would continue to buy soy from Argentina whilst on an official trip to Argentina to discuss trade matters this week. The announcement will reassure Argentine soy producers who depend on exports of soy to China, which is currently its largest market.

Currently China is Argentina's largest trading partner, with Chinese businesses buying up over €2 billion worth of Argentine products last year, a figure that has grown significantly in recent years and one that has largely been driven by soy exports. Last year 15 per cent of Argentina's agricultural exports were accounted for by soybean exports to China.

Reports have been circulated in the Argentine press that domestic soy producers were considering halting sales to China over fears that traders there might default on payments. Fears were further exacerbated over the reports that Brazil had struck up a trade deal to increase its supply of soy products to China last week.

In recent years increasing domestic food demands has meant that China has changed from being a large importer of soybean produce into a major importer of unprocessed soybeans. The move has also fuelled the Chinese government's ambitions to develop its local processing industry. In doing this Argentina has become one of China's largest suppliers of the soybean. Argentina's soy producers are so reliant on their trade with the country that even the slightest change in demand could have devastating effects. Currently 86 per cent of the country's soy exports are accounted for by the China market.

Brazilian and Argentine soy producers have become highly competitive in their fight to carve out a slice of the lucrative soy market in China. Just as Argentina has built up a reliance on the China market, so too have Brazilian soybean suppliers. In the last three years trade between Brazil and China has increased five-fold to €8 billion, much of that off the back of soybean supply.

Last week a Brazilian delegation comprising 450 state governors and business leaders met in Beijing to discuss trade issues between the two nations over a five day period. Following that meeting the Brazilian agriculture minister, Roberto Rodrigues, said that the country intended to develop a further 28 million hectares of Amazon rainforest into arable land, largely in an effort to meet rising demands for soy products.

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