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Economy

Brazilian export volume balances price decline

Feb, 07, 2024 Posted by Gabriel Malheiros

Week 202406

In the midst of falling prices, the increase in exported quantity led to a rise in Brazil’s export revenue in 2023, contributing to a historic trade surplus. Export volume hit a record high last year, continuing a trend established for over a decade. The upward trajectory is expected to persist, albeit at a slower pace compared to the substantial variation seen last year. Forecasts suggest that price fluctuations in 2024 will be less pronounced after the increases observed in 2021 and 2022.

The surge in exported quantity in 2023 was primarily fueled by China, which saw a 30% increase compared to 2022. Additionally, there was a notable 25.9% rise in volume exported to Mexico, propelling the country from eighth to fifth place among Brazil’s main export destinations. Although to a lesser extent, increases in volume were also observed in exports to key partners such as the United States and Argentina, with respective upticks of 5.8% and 7.9%. Conversely, sales to the European Union saw a 2.1% decline.

In terms of value, China dominated Brazil’s exports in 2023, accounting for 30.7%, followed by the U.S. at 10.9%, and Argentina at 4.9%. Mexico held fifth place with 2.5%, while the Netherlands, serving as the gateway to the European Union, absorbed 13.6% of exports.

Despite a 6.3% decline in the average prices of total Brazilian exports in 2023, export revenues increased by 1.7% compared to 2022 due to an 8.7% growth in shipped quantity, according to data from the Secretariat of Foreign Trade (Secex). This data indicates a historic peak in the export volume index for 2023, surpassing the previous record set in 2022.

Driven by soybeans, iron ore, and oil, sales to China reached unprecedented levels in 2023, exceeding $100 billion for the first time, marking a 16.6% increase over 2022, to $104.3 billion. Despite a 9.7% drop in average prices, the significant rise in volume more than compensated for it.

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)

The export prices and quantum data are from the Indicator of Foreign Trade (Icomex), compiled by the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV), based on Secex figures.

Lia Valls, economist and coordinator of Icomex, says that China’s performance is explained by Brazil’s agenda of exports to the Asian country. The Chinese bought 73% of all the soybeans Brazil exported in 2023, as well as 64% of iron ore and 47% of crude oil, according to Secex data. The three products accounted for 75% of the value of total Brazilian exports to China last year.

The good performance of exports from agriculture and the extractive sector, says Ms. Valls, has been going on since the late 2010s, with agricultural exports growing annually by an average of 10% and extractive activities by 5.2% from 2008 to 2023.

Last year, the record grain harvest led to a greater increase in volume, with a 25% rise in the amount of agriculture exports compared to 2022. The extractive industry advanced by 16.5% in the same comparison. Conversely, the volume exported in the manufacturing industry fell by 0.4%.

Ms. Valls points out that the performance of the balance as a whole also depends on imports. Last year, she stresses, the trade surplus of $98.8 billion was also the result of a very large drop in the trade deficit in the manufacturing industry, which fell to $37.7 billion in 2023 from $57.2 billion in 2022. The economist points out that this movement was mainly due to the fall in the value of imported industrial goods.

Looking ahead, the performance of Brazil’s exports to China in 2024 will depend largely on the pace of economic growth in the Asian nation, Ms. Valls said. China, she points out, has always used investment as a way of activating the economy, but fiscal problems could affect this policy. Brazil’s grain harvest is expected to be important in 2024, but it is likely to fall short of that of 2023, which will also limit exports. Despite uncertainties, China is expected to maintain growth, albeit at a lower rate compared to previous years—market estimates are below the Chinese government’s 5% GDP growth target for 2024. The significant increase in export volume in 2023 was partially due to lower bases in previous years, particularly in 2021 and 2022.

In contrast to sales to China, exports to the United States, Brazil’s second largest trading partner, showed more modest figures in 2023. The quantity exported to the U.S. increased by 5.8% in 2023 compared to the previous year, but this was not enough to compensate for the 6.8% drop in average prices, which led to a 1.5% reduction in the value sold to the U.S.

The scenario for the United States is explained by Brazil’s diversified exports, as industrialized goods predominate, said Welber Barral, a partner in the BMJ consultancy and former secretary of Foreign Trade. According to Secex, crude oil, semi-finished iron and steel products and aircraft and parts were the three most exported items to the U.S. in 2023, accounting for 31.4% of the value sold by Brazil to the U.S. last year.

Regarding exports to Argentina, the third-largest destination for Brazilian exports, both prices and quantity increased by 1.8% and 7.9%, respectively, in 2023 compared to the previous year, leading to an 8.9% rise in export revenue. However, Mr. Barral recalled that this surge was heavily influenced by atypical shipments of Brazilian soybeans due to crop failure in Argentina. In 2023, Brazil shipped $2 billion worth of soybeans to Argentina. In 2022 there were only $181 million. This level of soybean exports to Argentina is unlikely to be repeated in 2024, said Mr. Barral.

Soybeans accounted for 12% of the value shipped to Argentina last year, the same share as automotive parts and accessories. In third place were passenger cars, with 8.4%. At the same time, says Ms. Valls, there is still a lot of uncertainty about the Argentine economy, which could affect demand for Brazilian exports.

Among the biggest destinations for Brazilian exports, Mexico stood out last year. Exports to Mexico rose by 25.9% in quantity, which offset the 3.2% drop in prices and led to a 21.6% rise in export revenue. Secex data shows that exports to Mexico grew, driven by manufactured goods such as cars and vehicles for transporting goods, whose export values rose by more than 60% in 2023 compared to the previous year. But the soybean effect also appeared in sales to Mexico. The value of soybeans exported to the country rose 87.8% in 2023 compared to 2022. Last year, the three items combined accounted for 28.4% of the value exported by Brazil to Mexico in 2023.

“There are many uncertainties, but this trend in commodity exports is expected to continue for some time, unless we have a very big shock, but we shouldn’t have the same variation as last year. Oil production is also coming in now,” said Ms. Valls. According to Icomex, the volume of commodities exported in 2023 increased by 14.2% compared to 2022. The quantity exported in the non-commodities group fell by 1.9%.

Bruno Cordeiro Santos, a market analyst with StoneX, says that the outlook is that, driven by the pre-salt, the increase in oil production expected by 2029 will result in a rise in export volumes, since domestic refining capacity is unlikely to increase by the same amount. The consultancy’s estimates for oil production are in line with the official ones from the Energy Research Company (EPE), he says. Considering the investments made by Petrobras and private-sector companies, he points out, Brazilian production is expected to reach around 5 million barrels a day by the end of this decade.

Source: Valor International

Click here to read the original text: https://valorinternational.globo.com/economy/news/2024/02/06/brazilian-export-volume-balances-price-decline.ghtml

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