Chinese buyers prefer Brazil over cheaper Argentina soybean despite weaker peso: sources

New Delhi — Even as the Argentinian peso fell 21% week on week to 54 versus the US dollar, making Argentina's soybeans competitively priced, the Chinese buyers still prefer Brazilian beans because of its better quality, sources said this week.

China, world's biggest soybean buyer, processes over 80% of imported beans into soy meal, which is then used primarily for animal feed and so the protein content is a vital parameter in purchasing beans, sources said. The average protein content in Argentinian beans is 35%, while the Brazilian soy has better protein count at 37%.

Although there are reports of some Chinese soybean demand shifting from Brazil to the cheaper Argentina-origin beans, the trade volume may not be much, a Chinese trader said.

The Chinese crushers may start buying more Argentinian soybeans only if the price spread is at least 40 cents/bu lower than Brazilian beans, sources said.

SOYBEX FOB Santos soybeans for October loading were assessed at $368.01/mt and SOYBEX FOB Paranagua soybeans for October loading were assessed at $368.01/mt on Monday, according to the S&P Global Platts assessments.

On the other hand, Soybeans-Argentina, Up River offer price was observed at $354.49/mt on Friday, according to the Bolsa de Comercio de Rosario.

Amid the ongoing US-China trade tensions, Brazil and Argentina have become major soybean suppliers to the Asian giant.

Soybean is one of the major cash crops in Argentina, the world's third-largest beans exporter, with an average shipment of 5 million to 6 million mt in a marketing year (October-September).

Argentinian soybean trade might slow down due to the increased speculation among traders as the political uncertainty in Argentina continues, sources said.

Soybean farmers and traders may be hoarding their stocks in expectation of further peso depreciation, as the Presidential elections are due in October, according to sources.

Increased soybean demand for domestic crushing in Argentina might also put additional pressure on beans export to China, sources said.

The Argentinian soybean crushing industry is one of the world's biggest and Argentina is the world's top soy meal and oil exporter.

Domestic crushing in Argentina is expected to rise to 8.73 million mt, up 215% year on year in 2018-19 marketing year, according to the latest US Department of Agriculture report.

Soy meal shipments by Argentina in 2019-20 are projected at 30.5 million mt, up 9% on the year, the USDA report said.

-- Asim Anand, aanand@spglobal.com

-- Analysis by Ivy Li, newsdesk@spglobal.com

-- Edited by Kshitiz Goliya, kshitizgoliya@spglobal.com