China's resumption of soyoil purchases from Argentina has, after a week, already resulted in hefty orders, adding to the pressure on the South American country's supplies.

China, the world's top soyoil importer, has bought 70,000 tonnes of the vegetable from Argentina, after reversing on October 12 a curb on purchases implemented as part of a trade dispute with the South American country, Oil World said.

The German-based analysis group said that it expected a further 80,000 tonnes to follow next month, and 100,000 tones in December, as China, which raised its interest rates on Tuesday in the face of rising inflation, steps up efforts to tackle increasing food prices.

"Domestic vegetable oil prices in China reached a two-year high lately," Oil World said.

"This has added to inflation and stimulated government initiatives to sell some of their state reserves for vegetable oils and step up purchases on the world market."

Indeed, the group attributed Beijing's lifting of de facto curbs on Argentine soyoil imports - which were introduced in March ostensibly on food safety grounds, but linked by observers to a trade spat – to the rate of food price rises.

EU imports soar

Meanwhile, Argentina, the world's top soyoil exporter, and responsible for more than half of world shipments, also faces soaring demand from the European Union, which suffered a disappointing harvest of rapeseed, the region's oilseed staple.

EU overall soyoil imports will near-double to 420,000-450,000 tonnes in 2010-11, from 228,000 tonnes the year before, Oil World said.

"France, Italy and Spain were the major soyoil importers recently, primarily as a feedstock for their biofuel industries."

Argentina was the main exporter, and estimated to have shipped 98,000 tonnes to the EU last month, compared with just 3,000 tonnes in September 2009.

The EU, once self sufficient is rapeseed, has been forced to rely on imports for the past six years, with production dented this year by the wet harvest conditions in Germany and Poland, the region's top producers, which set back winter sowings of the 2011 crop too.

Price outperformance? 

Argentine soyoil also looks set to be in particular demand in coming months thanks to efforts by neighbouring Brazil to encourage use of the vegetable oil in biofuels.

"China will become more dependent on Argentine soyoil because Brazilian export supplies will decline in 2010-11 owing to higher domestic requirements for biodiesel," Oil World said.

Indeed, Argentine prices were likely to outperform those Brazil and the US, which China turned to as a source of substitute, if more expensive, supplies.