Bean here before

Chinese importers washing out Argentinian soy oil contracts, no biggie.

Argentina is an agricultural powerhouse and one of the world’s largest soybean producers – representing 46% of all foreign trade. Soy products account for 25% of the country’s exports and the importance of soy to the economy makes it a prime target for sensationalist press, even from apparently respected industry publications.

Our news monitoring system recently flagged articles reporting that Chinese importers have started ‘wash-outs’ on Argentine soybean oil contracts and switching to producers from the Black Sea region. This could be construed as a huge story with potentially wide-reaching geopolitical implications: the world’s second largest economy dumping contracts with the world’s largest soybean producer.

“Despite the relative ‘wash-out’ soybean oil exports from Argentina grew in the 2nd quarter, 13% compared to the same period of 2019.”

Executive of a mid-size company in the agroindustry.

Don’t set your short positions yet. Within a few hours, we had spoken to local sources including senior agribusiness executives, specialist agricultural lawyers and senior figures at the industry trade body who quickly put the ‘news’ in context: “Soybean oil sales from Argentina to China represent a very small portion of total annual sales, approximately 0.5%.”

“Chinese influence on this sector is small, even with these ‘wash-outs’, soybean oil exports grew in Q2 2020, up 13% compared to the same period last year.”

“China restricted purchases of soybean oil from Argentina until 2018 but even now sales are not very relevant, unlike soybean meal, which has very high export volumes.”

“Now the soybean oil market has stabilised and no major risks are seen at the moment.”

Executive in a sectorial chamber.

So, despite some sensationalist news articles there was very little impact. What then, is the point of this article? Well, many businesses, investors and algorithms rely exclusively on open sources for market intelligence, here is a clear reminder of why you shouldn’t always believe what you read and how a few conversations with real people can save you time and money.

If soybeans are of interest then the bigger challenges currently facing the sector include weak supply due to prolonged periods of dry weather, pandemic-related logistical issues and a rising tax burden on exports. If you would like to explore these in more detail, get in touch!

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