China scoops up cheaper Argentina soybeans as US harvest begins

China, the world's biggest soybean importer, has greatly increased purchases from Argentina after the government in Buenos Aires devalued the exchange rate for farmers, triggering a rush of sales.

China booked as much as three million tonnes in the past two weeks, according to people familiar with the matter who asked not to be identified because they are not authorised to speak publicly. That's almost as much as the roughly 3.75 million tonnes it imported from Argentina in all of last year, and risks eroding US demand just as US farmers begin to harvest their crop.

Earlier this month, Argentina's cash-strapped government temporarily devalued the peso for the soybean industry, triggering an influx of low-priced supplies on the world market as farmers rushed to sell their stocks. The Central Bank said on Monday it would tighten foreign exchange controls for soybean exporters, which may slow the frantic pace of sales for the rest of the month.

The cost of importing Argentine soybeans for October delivery is about US$200 a tonne cheaper than cargoes from the United States and Brazil because of tightening exchange rate policy, a unit of Chinese brokerage COFCO Futures said in a report. That makes processing Argentine soybeans more profitable in China.

The US Department of Agriculture last week cut the estimate for US production in 2022-2023 by more than four million tonnes, sending futures prices in Chicago sharply higher.

The purchases are mainly for loading in the coming months, people consulted said. Chinese soybean processors crush the beans to produce feed for the country's huge pig population. Domestic soybean meal prices rose about 10 per cent in the last month. The huge advance purchases will ensure that China is well-supplied for the coming months during a strong period for pork consumption.

China could buy more from Argentina if exchange rate policy remains favourable, people said.