The official news came on Tuesday that China would sign an agreement with Argentina on Wednesday to import its soybean meal livestock feed. Trapped in a protracted war with the United States, China has been strengthening and diversifying its imports of agricultural products. 

For crushers in Argentina, it is just like pennies from heaven. Soybean exports have been more competitive for Argentina due to growing soybean prices and its tax reform last year. And this has greatly harmed the profits of crushers, so that their idle crushing capacity has been more than 50% for a good while. Normally, the crushing capacity is more than 65 million tonnes, but it has been just a little above 40 million tonnes for several years, with the soybean meal output at about 30 million tonnes. As long as China does not resume U.S. soybean purchases, Argentina will be able to raise soybean meal supply in China. 

　　

Some market participants in China are concerned whether domestic soybean crush will be occupied by Argentine soymeal imports. But the crux of the matter seems to lie in the feasibility of substantial soymeal imports. 

Import margins: The duty-paid price of Argentine soybean meal to China in November and December is 2,906 yuan/tonne, which is basically flat with basis of forward contract, according to Soybean Meal CNF China calculated by Cofeed on September 11. 

Domestic market supply is smooth at present, which means there is not a gap for import margins of Argentine soybean meal. In the near term, domestic importers may not be as active in buying as expected.  

Add to that, import tax for soybean, soymeal and soyoil to China is 3%, 5% and 9%, so it is more profitable to import soybeans directly and to crush them at home. 

Therefore, Argentine crushers have to wait for a chance when soybean meal prices in China will soar due to the imbalance of supply and demand. 

Protein quality: Crude protein content of soybean is 48.8%, 47.5% and 46% for Brazil, the United States and Argentina, respectively. (Maitri Thakur · Charles R. Hurburgh, 2007) For spot merchants in China, Argentine soybean meal is not the optimal choice. In addition, soybean meal from Argentina have to sail for months to China, during which the quality may also change. For a normal workflow, it will take Argentine soybean meal about two months to arrive at ports in China. And once such indicators as moisture and mildew suffer some changes, buyers may ask for a discount. 

At present, it is less likely that Chinese importers will buy a substantial amount of soybean meal from Argentina, no matter in the terms of import tax or protein quality. Besides, an agreement is just the first step, because it will still take months for the procedure of inspection and quarantine, application and registration, etc.. But certainly, domestic market sentiment has been influenced as China has yet resumed its soybean purchases from the United States.