Brazil grains exports grow ever dependent on Chinese appetite

Brazil is growing increasingly dependent on China for its grain exports. In 2023, China also evolved into the primary destination for Brazilian corn in the international market. This scenario isn’t likely to change in the short term, causing concern among experts.

In 2023, China acquired 75% (75.6 million tonnes) of the slightly over 101 million tonnes of soybeans exported by Brazil, according to data from industry group Anec. One year earlier, the country had purchased 69% of Brazil’s soybeans sent abroad.

“When looking at the numbers objectively, they are alarming. Brazil can diversify its soy trade partners but cannot stop exporting to China. If a country aims to be a major player in the soy market, it needs to have the capacity to meet China’s needs, which Brazil is able to do,” says Sérgio Mendes, the general director of Anec.

Although discussions about diversifying destinations often arise, Mendes does not foresee a decrease in China’s appetite for Brazilian soybeans. Jean Carlo Budziak, part of Anec’s market intelligence, shares the same sentiment: “Just as they say we are dependent on China [for soybean exports], they also depend on our product.”

Fábio Silveira, partner at MacroSet Consultores, acknowledges the dependence of Brazil on China for grain exports is a challenging and enduring situation. He reckons, “We won’t be able to escape this dependence soon because it is significant, and there is also a commitment from the productive base to this export.”

The dependence relationship is underscored in data from the United States Department of Agriculture (USDA) cited by Lucílio Alves, a researcher at the Center for Advanced Studies in Applied Economics (Cepea). Last year, China accounted for the purchase of 60.6% of soybeans exported globally.

“There is a need to seek other soy buyers, but the question is where to find importers with as much relevance as China,” says Alves, adding that Brazil exported soybeans to 57 different countries in 2023, a record number.

China’s Production

Both Anec’s leaders and Cepea’s researcher believe that Chinese demand for soybeans will remain strong in the coming years, even if Beijing invests in new cultivars to increase local soybean production.

However, according to Silveira, producers should prepare for new developments as China strives to reduce imports from Brazil. “It’s challenging to say when, but at some point, China will make its investments to increase food production worthwhile.”

According to him, “As there is nothing that can be done in the short and medium term, Brazil needs a state policy, focusing on diversifying agricultural products beyond grain exports, with solid investment in agricultural research.”

In Jean Carlo Budziak’s assessment at Anec, even if China aims to increase local production, “we are talking about a medium-term plan, so it won’t become independent of Brazilian imports anytime soon; China’s share should stay around 70% this season.” According to the USDA’s latest projections, Brazil is expected to ship 99.5 million tons of soybeans in the 2023/24 season.

The following chart compares the volume of corn and soybeans shipped through Brazilian maritime ports to China in the first eleven months of 2023, according to the DaLiner data service.

Corn and Soy Exports to China | 2023 | WTMT

Source: DataLiner (click here to request a demo)

Corn

The year 2023 also marked the first time Brazil effectively sent corn to the Asian economic hegemonic power, following the endorsement of a phytosanitary protocol at the end of 2022. The numbers exceeded expectations. Out of the 55.6 million tons of corn that left Brazilian ports last year, the Chinese acquired 31% of this total, equivalent to 17.4 million tonnes.

“We did not expect such an aggressive demand from China since the initial estimate was shipments in the range of 5 [million] or 6 million tonnes, let alone it surpassing traditional importers like Japan, Iran, and South Korea in the first year of regular sales,” comments Mendes from Anec.

The combination of a record corn harvest in Brazil, a decline in American output, and logistics issues in the Black Sea made Brazil the largest corn exporter to China in 2023, surpassing the United States.

This year, the scenario is expected to be different, as Brazil is likely to harvest less corn, while the United States and Ukraine expect a comeback.

Regarding other countries, Fábio Silveira emphasizes the importance for Brazilian grain exporters to expand trade with other Asian nations and destinations with large populations. “India and Bangladesh would be interesting destinations for Brazilian grains, as well as Russia and Middle Eastern countries. Brazil cannot afford to be complacent and must actively seek other trading partners instead of waiting for China to decrease its imports,” asserts the analyst.

Source: Globo Rural

Click here to read the original news piece in Portuguese: https://globorural.globo.com/agricultura/soja/noticia/2024/01/brasil-depende-cada-vez-mais-da-china-nas-exportacoes-de-graos.ghtml

Sharing is caring!