Cargill sees Chinese buyers demanding fewer Brazilian soybean

Chinese demand for Brazilian soybean exports this year is lower than expected, which explains why Brazil’s record harvest has not yielded monthly export records, the chief of commodity trader Cargill’s Brazil unit said in an interview.

The lower-than-expected demand from China allows more constant Brazilian grains exports throughout the year, added Paulo Sousa, the U.S. commodity giant’s local chief executive, stressing that it should reduce stress on logistics during the current crop, which is forecast to hit a record high.

Cargill’s net income in Brazil last year fell to 1.2 billion reais ($238 million), compared with 1.8 billion reais in the previous year, due to rising costs for logistics and production.

Sousa said that net operating revenue in Brazil grew 22% in 2022 to about 126 billion reais, boosted by soybean processing and increased corn exports.

Sousa said he preferred not to comment on the reasons for this year’s underwhelming Chinese purchases, the largest global importer of soybeans, only offering that the “post-pandemic scenario left many doubts.”

Brazilian soybean premiums at ports fell to historic lows last week due in part to lower Chinese demand.

See below a chart displaying Brazil’s soybean exports to China from Jan 2019 and Feb 2023, according to the DataLiner data service.

Soybean exports to China | Jan 2020 – Feb 2023 | WTMT

Source: DataLiner (click here to request a demo)

In addition, the executive pointed out that Brazil’s Cargill concluded several shipments to Argentina to meet the neighboring country’s oilseed demand since its crops were severely affected by drought. More such shipments are expected ahead.

He also said that lower supplies in the neighboring country bring demand for soymeal and soy oil up since Argentina is traditionally a bigger exporter of these two products.

European Union

On a different note, once implemented, a new European Union law against products linked to post-2020 deforestation could lead Europeans to pay more for Brazilian soymeal, said Cargill’s CEO.

Still, he stressed that even though further details on the EU legislation were not made public yet, Brazil has “the condition to supply any type of sustainable demand.”

“What does not make sense is making Brazil provide a particular product at a lower cost, making it sell a special product at a commodity price. That won’t happen,” he said.

The European Union is the primary importer of soybean meal from Brazil and buys good volumes of “in natura” beans.

“It’s much easier to set up a soymeal program in Paraná (a more consolidated agricultural region) than to get crushed soybeans from western Bahia. However, meals from western Bahia would theoretically arrive in Europe cheaper by freight,” he said.

Source: Money Times

To read the original news report, please refer to: https://www.moneytimes.com.br/cargill-ve-demanda-da-china-por-soja-do-brasil-abaixo-do-esperado-investe-em-processamento/

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