The export price of Argentine soy-oil has plummeted 21% so far this year, due to new European bio-diesel tariffs and China’s change of policy, putting one of the country's key industries at risk. Argentina is the world's top exporter of soy-oil, which is used to make bio-diesel.
Argentina's bio-diesel manufacturers are operating at only 35% capacity due to European import tariffs that followed a 2012 increase in Argentine bio-diesel export taxes.
The local price of port-side soy-oil is at around 900 dollars per ton, 13% less than that paid on the benchmark Chicago futures market.
All the soy-oil that is not converted into making bio-diesel has to be sold on the international market, said Luis Zubizarreta, head of Argentina's Carbio bio-fuels exporters' chamber.
We have more and more raw soy-oil to sell, so we are going to have to start competing in new export markets that consume less expensive vegetable oils such as palm oil, he added.
Carbio represents major bio-diesel processors like Cargill, Bunge, Glencore and Noble. These companies helped the world's No. 1 bio-diesel supplier export 1.6 million tons of the bio-fuel last year, worth between 1.8 billion and 1.9 billion dollars.
Argentina's soy-oil processing industry is now working at 75% capacity when idle capacity really shouldn't be more than 10 or 15% said Andres Alcaraz, spokesman for the country's CIARA-CEC grains export chamber.
Argentina's bio-diesel industry can produce 4 million tons per year, but in 2012 it processed only 2.4 million tons, about the same as in 2011. Output was curtailed both years by lower demand from economically ailing Europe, Argentina's main bio-diesel customer.
Europe's economy is slowly recovering and may crawl out of recession by the end of this year. But the European Union has meanwhile imposed punitive duties on imports of bio-diesel from Argentina and Indonesia after charging both countries with selling at unfairly low prices.
Industry sources say Argentine bio-diesel production could sink to 1.2 million tons in 2013. Exports of the product fell almost 50% year on year in the first quarter due in part to the anti-dumping investigation opened by Brussels in 2012.
When the new duties were imposed in May of this year, Argentina denounced them as a protectionist response to Europe's own inefficiency.
Another challenge for Argentina comes from China which is investing in more crushing plants to convert soybeans into these derivative products on its own soil.
Argentina's soy-oil sales to China amounted to 31,300 tons in the first quarter versus 47,198 tons in the same 2012 period, but sale of raw Argentine beans to China increased by 66% in the same time frame.
China was once a great buyer of Argentina soy-oil, said Rogelio Ponton, an analyst with the Rosario grains exchange. ”Now they are crushing their own beans”.