The US-China trade war has been a boon for Brazil’s soybean farmers. But can they keep up with Chinese demand?
- US shipments of soybeans to China have halved since Beijing slapped a 25 per cent punitive duty on them in July
- Weather conditions threaten this year’s harvest as Brazil’s farmers aim to meet 30 per cent increase in demand from China, says head of trade body
There are winners and losers in any spat, and they are often not the parties at loggerheads.
Brazil’s soybean farmers, for example, have triumphed spectacularly in the US-China trade war. In fact, they’ve done so well they may become victims of their own success, according to the head of a Brazilian trade promotion agency.
After their shipments to China jumped by almost a third last year to fill the void left by soybean imported from the US, the South American growers may struggle to maintain the same supply, said Igor Brandao, chief of the agribusiness division at Apex-Brasil.
“The harvest for this year is expected to be smaller than last year. It is a matter of weather conditions, because the dry season is expected to be longer this year,” he said.
Brandao pledged that Brazil, the biggest supplier of soybeans to China, will do its best to increase production to cater to the demands of the world’s second-largest economy. The country became a key beneficiary of the trade war when tariffs on US soybeans made Chinese buyers look elsewhere to import the crop.
“We are prepared to take advantage of the trade war to increase our business with China and further build trade relations,” he said on the sidelines of SIAL China, a major trade event for the agribusiness sector. “But we don’t just rely on it to expand our businesses here.”
China is the world’s biggest consumer of soybeans, importing 88 million tons of them in 2018, according to the General Administration of Customs.
It slapped a 25 per cent punitive duty on American soybeans in July. The two sides suspended the levies in December when they agreed to negotiate, but that was too late to reverse a plunge in Chinese imports of the plant from the US.
About 66.1 million tons of China’s imported soybeans came from Brazil last year, accounting for 75 per cent of the country’s total imports. That volume was 30 per cent higher than the previous year.
The US supplied 16.6 million tons of the soybeans, down 49 per cent from a year earlier, owing to the trade spat between the two countries.
Soybean is a major source of protein for animal feeds and edible oil in China.
Last Friday, US President Donald Trump raised the tariffs on US$200 billion worth of Chinese goods from 10 per cent to 25 per cent when the world’s two largest economies failed to reach a deal after months of negotiations.
To fight back, China announced on Monday that it would increase tariffs on a further US$60 billion of American products to 25 per cent from June 1.
China’s trade spat with the US created opportunities for countries like Brazil, particularly in agriculture.
“We hope to promote our businesses with China in a long-term, sustainable way,” Brandao said. “We know it’s not going to happen very quickly, but we see new demand from the Chinese middle class for healthy and premium food products.”
He said Brazil is seeking to diversify its agricultural exports to China with a focus on processed meat.
At present, soybean, cotton and maize make up 70 per cent of Brazil’s total exports, worth about US$36 billion to China.
In 10 to 12 years, processed food products are expected to represent 40 to 50 per cent of Brazil’s exports to China, said Brandao.
The Brazilian minister of agriculture, Tereza Cristina, is in Beijing now to discuss with senior officials the possibility of bringing more agricultural products to China.
The largest nation in South America sold US$1.5 billion of processed meat to China last year, up 60 per cent from 2017. The export volume is set to grow further this year, likely to more than US$2 billion.
Apex-Brasil is in Shanghai to organise 26 Brazilian companies to exhibit their products at SIAL China, which finished on May 16.
As of May 15, the 26 companies had secured deals worth US$150 million, according to Brandao.