Jul 26, 2010
Argentina and China Fail to Resolve Soybean Oil Dispute
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
One week after President Kirchner returned from an official visit to China, the Argentine government announced another round of higher import duties that will be levied on Chinese and Brazilian goods, specifically food processors. This is the second time in 2010 that the Argentine government has accused the Chinese of dumping goods into the Argentine market. The first antidumping accusation occurred in January of 2010 and it involved shoes and various industrial items. In response, the Chinese government suspended the purchase of Argentine soybean oil in April of 2010.
This latest round of commercial fighting came after a meeting between President Kirchner and President Hu Jintao in which the Chinese government announced a US$ 10 billion line of credit for the Argentine government to modernize its railroads. The money would be available for purchasing new rail cars for the Buenos Aires subway system, starting the construction of a subway in the city of Cordoba, and the extension of an existing subway line from downtown Buenos Aires to the Ezeiza international airport. The credits though would only be available for the purchase of railway equipment manufactured in China.
The meeting of the two presidents did not resolve the dispute concerning soybean oil. Argentine soybean processors had expected to sell US$ 2 billion worth of soybean oil to China in 2010. Instead of resolving the issue, the Chinese government has appointed a high level commission to study the issue.
The news is not all bad for soybean processors in Argentina. India has absorbed the majority of the soybean oil that was destined for China and much of the remaining oil has been diverted to increased production of biodiesel. As a result, the biodiesel blend in Argentina went from B5 (a 5% blend of vegetable oil mixed with petroleum diesel fuel) to a B7 blend.
These alternative measures for the disposing of soybean oil are viewed as just temporary fixes to the overall trade dispute between the two countries. A more permanent resolution will need to be reached, but the timeframe for any resolution is an open question.