Eight commodities account for nearly two-thirds of Brazil’s exports
Oct, 20, 2023 Posted by Gabriel MalheirosWeek 202340
From January to September this year, eight key commodities —soy complex, crude oil and fuel oils, iron ore, meat complex, sugar, corn, cellulose, and coffee— contributed significantly to Brazil’s exports. Together, they represented a value of $163.2 billion, or 64.5% of the country’s total exports, which stood at $253 billion. This proportion is marginally higher than the 63.5% observed during the same period in 2022 and vastly greater than the 26.3% recorded in the first nine months of 2000, according to statistics provided by Brazil’s Department of Foreign Trade (Secex).
Compared to the previous year, the growth in the export share of these commodities in 2023 can be primarily attributed to an uptick in sales to China. From January to September, exports to the Asian nation, primarily of basic products, climbed by 10.8%, reaching $77.2 billion. Consequently, the percentage of sales to China rose to 30.5%, a jump from 27.5% during the same months in 2022.
The overall value of exports saw a minor decline of 0.1% for the year up to September. During this period, sales to the U.S. and the European Union (EU) decreased by 4.5% and 11.4%, respectively. Consequently, the percentage of sales to the U.S. dipped from 11% to 10.5%, while sales to the EU dropped from 15.3% to 13.6%.
Over the past 20 years, a significant increase in exports of these commodities can be primarily attributed to China’s robust demand for goods that Brazil produces proficiently. This demand surge coincided with challenges faced by Brazil’s industry in maintaining competitiveness. Economist Livio Ribeiro of BRCG Consultoria and an associate researcher at the Brazilian Institute of Economics at the Getulio Vargas Foundation (FGV Ibre) encapsulate this trend as “China in the vein.” He elaborates, “We have integrated into China’s input and supply chain by offering essential goods and products they consume and utilize.” To put this into perspective, from January to September 2000, China made up a mere 1.9% of Brazil’s export market.
Highlighting Brazil’s efficiency, Sérgio Vale, the chief economist at MB Associados, notes, “Given our high agricultural productivity, we’ve been able to cater to the rising Chinese demand.” He adds that this applies to the mining sector as well. “Following its privatization, Vale has met the demand by supplying the iron ore sought by the Chinese.” Another area of note is the export of crude oil, predominantly destined for China, and fuel oils, both of which have seen substantial growth in production and demand.
Concentrating exports primarily on a select group of commodities carries the risk of being vulnerable to price volatility, which can vary dramatically. This trend underscores Brazil’s competitive edge in producing these goods, most of which are in high demand from China —now the world’s second-largest economy after the U.S. Despite China’s slowing economic growth in recent years, it remains the primary market for most of these commodities, with fuel oils, soybean meal and oil, and coffee being exceptions. For certain products, China is the dominant buyer by a significant margin, such as soybeans (71%), iron ore (62%), beef (61%), and both crude oil and cellulose (47%).
Rafael Cagnin, chief economist at the Institute for Industrial Development Studies (IEDI), underscores the significance of China’s rapid economic growth paired with its urbanization. He states, “This momentum, driven by primary products to fuel China’s core industries and also cater to urban household consumption patterns, resulted in a surge in global demand, particularly in the 2000s, and a rise in commodity prices.”
Up to September of this year, the soy complex —including grain, meal, and oil— comprised 22.6% of Brazil’s total exports. That is the most significant share since the data series by Secex began in 1997. In monetary terms, sales of this grain saw a 9.9% increase, reaching $45.6 billion, compared to the same timeframe in 2022. This surge occurred despite a 16.7% price drop, propelled by a 23.8% spike in export volumes. The soybean yield for this year is predicted to break records, with an estimated growth of 26.5%, amounting to 151.2 million tonnes, as forecasted by the IBGE (Brazilian Institute of Geography and Statistics).
The chart below shows soybean (whether or not in meal form) exports from Brazil between Jan 2019 and Aug 2023. The data is from DataLiner.
Soybean exports from Brazil | Jan 2019 – Aug 2023 | WTMT
The volume of exports, rather than their prices, has predominantly driven the exports of iron ore and other commodities. From January to September, the exported quantities of iron ore increased by 7.3%. However, the prices dropped by 11.1%. Consequently, the export value decreased by 6% to $21.6 billion compared to the same period in 2022. This value represents 8.5% of Brazil’s exports during these nine months. The highest contribution of iron ore to exports was observed from January to September 2021, at 17.1%. Around mid-2021, prices had peaked, surpassing $220 per tonne.
In the last two years, prices have notably declined, clarifying the reduced value of iron ore exports. These exports were valued at $36.4 billion from January to September 2021. Although the prices began to ascend at the end of August, they currently hover below $120 per tonne.
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