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Trade war spurs soy merry-go-round as China turns to Argentina

[CHICAGO] President Donald Trump's trade war with China is turning the global soybean market into a merry-go-round.

With Brazilian exports drying up at this time of the year, traders are having to get creative to supply the world's largest buyer. One strategy is to bring US soy to Argentina and ship the South American nation's output to China, thereby avoiding the Asian country's 25 per cent tariff on American product.

Three vessels are scheduled to load Argentine soybeans bound for China after one shipment left earlier this month, according to data from shipping agency Agencia Maritima NABSA. While Argentina usually sends some of its production to China, a drought that slashed harvests meant traders weren't expecting any exports at this time of the year.

"Argentina is buying US beans for the domestic market and exporting its own production to China," Matt Ammermann, a commodity risk manager at futures and options brokerage INTL FCStone, said by telephone.

Ships Rosco Banyan, Sunshine Bliss and Seacon 9 are scheduled to load a combined 167,740 metric tons of Argentine soybeans between Sept 23 and Oct 1, NABSA data show. That comes after a vessel left earlier this month carrying 36,119 tons of Argentine soybeans and some Uruguayan supply.

Argentina usually produces more soybeans than it consumes, leaving 8 million to 9 million tons left for export markets. But this year a drought curbed output by 31 per cent, forcing the nation's crushers to import. US traders sold 840,000 tons of soybeans to Argentina in the week ended Sept 13, up from nothing in the same year-ago period, according to the US Department of Agriculture.

There's a "nice margin" to import US soybeans for crushing in Argentina, Mr Ammermann said.

Brazilian grain-export group Anec said earlier this year the nation could end up importing as many as one million tons of US soybeans as a result of the trade war.