(Bloomberg) --
China is opening the door to soybean meal shipments from Argentina, the world's biggest exporter of the animal feed, as Beijing looks to pivot away from U.S. agricultural products amid a trade war with Washington.
On Tuesday, China agreed to allow soy meal imports from the South American nation after two decades of talks, according to Argentina's Agriculture Ministry.
Beijing has been loathe to accept Argentine meal because it prefers to import raw soybeans and process them in China to promote its own crushing industry. But the trade war has been turning global supply chains on their head.
Firstly, as China shunned U.S. beans, it turned to Brazil -- and to a lesser extent Argentina -- for supplies. Now it's going one step further, accepting value-added meal from Argentina even though the move risks angering its crushers.
China is willing to do business with nations anywhere in the world to spur global trade, which brings profits for buyers and sellers alike, Xiaoli Zou, the Chinese ambassador to Argentina, said Wednesday at an event in Buenos Aires to announce the accord. Those comments come as the U.S. and China prepare to resume talks in the coming weeks to defuse the trade war.
Argentina and China still need to jump through bureaucratic hoops before cargoes of soy meal can set sail.
Final approval of sanitary rules and Argentina's crushing plants should happen next month, Ricardo Negri, head of Argentina's agricultural sanitary agency, Senasa, said on the sidelines of the event. Inclusion of meal on China's customs register is expected before the end of the year, paving the way for shipments in the first months of 2020, Negri said.
Read More: Argentina Soy Crushers Meet With China on Path to Meal Approval
In August, a Chinese delegation visited crushing plants on the Parana River run by Bunge Ltd., Louis Dreyfus Co., Cargill Inc., Aceitera General Deheza SA, Molinos Rio de la Plata SA, Cofco Corp. and Renova, which is a joint venture between Glencore Plc and Vicentin SAIC.
Those plants are now forecast to ship 2.3 million metric tons of soy meal to China in 2020, or roughly 8% of production, Gustavo Idigoras, head of crop export and crushing chamber Ciara-Cec, said in an interview.
The cargoes will be bought by chicken farms, easing concerns about falling demand from the nation's huge pig herd, which is shrinking because of African swine fever, Idigoras said. Exports should grow strongly after next year, he said, though that will depend on the prevailing winds of global trade and economics.
Being able to export to China is a big boost for Argentine crushers whose margins have been falling, with idle capacity increasing to more than 50%.
The announcement also comes at a time when China is expanding its footprint in Latin America by developing infrastructure projects across Argentina, from hydroelectric plants to railways.
To contact the reporter on this story: Jonathan Gilbert in Buenos Aires at jgilbert63@bloomberg.net
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Millie Munshi
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