Brazil poised to reap soybean sales benefits from China-US trade tensions

April 26, 2018 – The Financial Times reports that the Trump tariffs serve Beijing’s goal of building closer ties with Latin America. One of the greatest concerns is that of the heavy duty soybean harvesting in Campo Verde, Brazil, much of which is destined for China at the expense of American soybean producers.

soybeans

According to the Financial Times report, the looming trade war between the world’s largest economies have sent Brazilian soybean premiums soaring, rallying to a 21-month high, according to analysts at Commerzbank.

“Brazilian farmers could be the winners in the longer term if China and the US do come to blows, analysts said. Indeed, by threatening China with a trade war, US President Donald Trump could be unwittingly helping Brazil’s ambitions to dominate the global agricultural export market and Beijing’s goals of building closer ties with Latin America, analysts say.

China is already Brazil’s biggest trading partner and is becoming an important investor, ploughing nearly $21 billion into Brazil last year. Neighbouring Argentina, the world’s third largest soybean producer, could benefit too.

Brazil produced 114.1 million tons of soybeans in the 2016-17 season, of which about 47 percent was exported to China, according to figures provided by Aprosoja Brazil, the Brazilian association of soybean producers. Meanwhile, the US produced 116.9 million tons of which about 31 percent was exported to China. Together with Argentina, which produced 57.8 million tons in the same period, the three countries provide the vast bulk of world soybean production.

Brazil has the ability to double soybean production by spreading into the country’s vast degraded pastoral lands, depending on market prices.

TS Lombard said in its report a potential Chinese tariff on US pork imports could also benefit Brazilian pig producers as well, although they are still a relatively small supplier and their exports have been hit by a domestic scandal concerning health inspections. The Brazilian beef industry could be another beneficiary.”

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