Will China turn to Argentina to fill its farming import gap? Wheat and see

Source:  South China Morning Post

Argentinian firms have expressed an interest in boosting their agricultural shipments to China, welcome news for Beijing as it seeks alternative sources for its staple crops amid tension with the United States that appear unlikely to abate.

The first batch of wheat shipments from Argentina – one of the world’s largest exporters of the crop – will soon begin its journey to China, local economic newspaper Ambito Financiero reported on Monday. The paper did not provide an exact date of departure.

This would be the first wheat export from Argentina to China since the 1990s, and follows an authorisation issued in January for shipments of the crop to China. Argentina’s Ministry of Agriculture, Livestock and Fisheries called the approval “an important step for Argentina’s exports” in their press release at the time.

China is the world’s third-largest wheat importer, receiving 12.1 million tonnes in 2023 at a value of US$4.42 billion, according to customs data.

The United States ranks as China’s third-largest wheat supplier, shipping a total of 4.3 million tonnes in the first 10 months of this year and accounting for 10.3 per cent of the country’s total imports.

But as US president-elect Donald Trump threatens to slap 10 per cent tariffs on Chinese products – with sterner action potentially to come – analysts said this could present an opportunity for countries in the Global South to expand their trade with China, particularly when it comes to agriculture.

“China has been looking to diversify its export-import partners for years, particularly during Trump’s first term. The return of Trump for a second term is going to add a lot of urgency to this,” said Nick Marro, lead analyst for global trade at the Economist Intelligence Unit.

In retaliation for the hefty tariffs imposed during Trump’s first term, China imposed 25 per cent tariffs on US agricultural products in 2018, covering bedrock items like soybeans, beef, pork, wheat, corn and sorghum.

As a result, imports of farm products from the US decreased as other countries with abundant supplies of the same goods – Brazil, notably – filled the vacuum.

In the first 10 months of 2024, only 16.7 per cent of China’s imported soybeans by volume were from the US, compared to 34.3 per cent in 2017.

Brazil, on the other hand, accounted for 75.5 per cent of China’s soybean imports so far in 2024, up significantly from the 53.3 per cent recorded in 2017.

China is now Brazil’s biggest trade partner, with trade value rising 6.1 per cent year on year to US$181.5 billion in 2023.

In similar fashion, Argentina is looking to expand its trade relationship with China.

By late May, China had opened its market further to Argentina’s corn exports, according to agricultural officials.

Though its US$6.7 billion in imports from the South American country in 2023 represented a drop of 21.7 per cent compared to a year earlier, China is Argentina’s second-largest trade partner. Its most prominent imports are agricultural – primarily soybeans, beef and barley.

Tariff hikes from the US could push China to speed up its development of the domestic market and further reduce its dependence on the US, observers noted.

“China could transform from a ‘world factory’ to ‘world factory and market’,” wrote Lin Hongyu, dean of the College of International Relations at Huaqiao University, in an article published Monday.

But Marro cautioned this would depend on China’s own economic situation. Domestic demand has been lacking at times, which has in turn affected import volume.

“Efforts to restore domestic demand, to encourage consumption, that’s going to be much more important than any policy pledges around increasing imports”, Marro said.

China’s import value decreased by 5.5 per cent year on year to US$2.6 trillion in 2023. In the first 10 months of this year, the same figure increased by 1.7 per cent year on year to US$2.1 trillion.

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