Chinese demand for Argentine soya-based animal feed will stay strong as the Asian country's budding love affair with beef steak triumphs over its own slowing economy, an Argentine official said on Friday. Argentina is the world's No 1 exporter of soyameal, used as animal feed particularly in China, where a growing middle class is shifting away from rice and toward a diet that includes more meat even as the country's once-explosive economy moderates.
"Cattle ranching in China has an extraordinary future. The question is which countries will provide the protein to feed that cattle," Argentine Agriculture Secretary Lorenzo Basso told reporters on the sidelines of a regional meeting of the UN's Food and Agriculture Organisation (FAO).
Chicago soyabean futures closed higher on Friday after a figure for 2012 US soyabean plantings from that country's Agriculture Department came in below expectations. Despite recent market bullishness that saw soya at six-month highs this week, traders are keeping a close eye on the economy of key buyer China, whose slowdown is linked to the debt crisis in its single biggest export partner, Europe.
"China is going through an enormous demographic shift toward the middle and upper-middle class. Those people are demanding a better diet, which means they want to replace the rice they eat every day with meats," Basso said. "So we do not believe there will be any restriction in Chinese buying of soyameal," he added.
World grain prices should remain "very firm" over the near term as demand from Asia exceeds forecasts and dry weather cuts into supply, FAO Senior Economist Abdolreza Abbassian told Reuters on Monday. Argentine soya production has been curtailed this season by a six-week dry spell, related to the La Nina phenomenon that hit during the December and early January dog days of the Southern Hemisphere summer.
"We had originally hoped for (a soya harvest of) about 50 million tonnes, but it will turn out to be 15 or 20 percent less," Basso said. The government now expects 2011/12 soya production of 44 million tonnes. Basso said the season had been saved from disaster by farmers who saw the drought coming and chose to plant late. Those growers benefited from unexpected storms that hit the country's vast Pampas grains belt in late January and February.
He declined to speculate on whether La Nina, caused by a cooling of waters in the Pacific Ocean and which tends to cause dryness in Argentina, would be a factor in the 2012/13 season. "The world is going through climate change. When that happens, even the best weather forecasters can be wrong," he said.
While weather risk remains high, Argentina - the world's No 3 soyabean exporter and No 2 supplier of corn - is sure to remain a key provider as demand for food and animal feed is set nearly to double by 2050, according to the United Nations. Grains exporters with operations in Argentina include Cargill, Bunge, Molinos Rio de la Plata, Noble and Louis Dreyfus.