Oil poised to overtake soybeans as Brazil’s top export

Oil is on track to become Brazil’s leading export product in 2024, a milestone not seen since trade balance records began in 1997. As of November 25, according to the most recent data, soybean exports totaled $41.92 billion, just $60 million ahead of oil exports, which reached $41.86 billion. These figures show soybeans accounting for 14.62% of exports, with oil close behind at 14.61%. In the same period last year, their shares were 16.5% and 12.6%, respectively.

Oil is expected to surpass soybeans, which historically see higher shipment volumes until September due to seasonal harvest patterns. As of late November, daily average soybean exports stood at $68.34 million, compared to $255.76 million for oil.

Oil is set to close 2024 with record export levels, having already hit a historic high from January to October, according to data from Brazil’s Foreign Trade Secretariat (SECEX). Oil exports in this period totaled $38.29 billion, a 10.6% increase compared to the same period in 2023. Meanwhile, soybean exports dropped 15.6% year-over-year, totaling $40.97 billion by October.

The decline in soybean export values is primarily due to a smaller harvest. According to the National Supply Company (CONAB), Brazil’s soybean production for the 2023/2024 harvest is estimated at 147.38 million tonnes, down by 7.23 million tonnes from the previous season. The decrease was largely caused by adverse weather, including delayed rains and high temperatures.

Brazil’s oil production, meanwhile, also reached record levels in 2023. Data from the National Petroleum Agency (ANP) shows that by October 2024, production was up 0.3% compared to the same period last year.

Despite the growth in exports, Brazil’s oil production in 2024 fell short of expectations, with a slight decline projected for the year compared to 2023.

“During the second half of last year, production rose due to new investments, the opening of new wells, and improved productivity at existing sites. However, production slowed in the first half of 2024,” said Bruno Cordeiro, a market analyst at StoneX. Besides an important number of mature wells contributing to a natural decline in supply, he explained, there were delays in the anticipated opening of new wells.

Brazilian refineries’ shift toward producing higher-value oil products also contributed to an increase in crude oil exports. “This created a larger surplus of crude oil for export over the past three months,” Mr. Cordeiro explained.

Since 2017, oil has consistently ranked among Brazil’s top three export products alongside soybeans and iron ore. “However, oil becoming the leader is unprecedented. Historically, the rivalry for the top spot was between iron ore and soybeans,” said José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB).

Rising oil production and price trends have influenced this shift. While both soybeans and oil saw price declines, the drop in soybean prices was steeper. From January to October, the average export price for soybeans fell 16.8% compared to the same period in 2023, while oil prices dropped only 2.9%, according to SECEX.

Geopolitical uncertainties

International price trends remain a key factor for oil exports. “We’ve seen downward pressure on oil prices, especially since August. At the beginning of the year, oil was trading around $90 per barrel, but now it’s between $70 and $75,” Mr. Cordeiro noted. This decline reflects concerns about global demand in the coming years, particularly as the U.S.-China trade conflict escalates, potentially slowing global economic growth.

The geopolitical landscape also plays a role. U.S. President-elect Donald Trump’s proposed protectionist policies could shift oil export dynamics further toward China. Currently, 57% of Brazil’s oil exports go to Asia, with approximately 45% destined for China.

“Trump’s push for increased U.S. domestic oil production could indirectly affect Brazilian oil exports, possibly reducing demand from China if geopolitical tensions rise,” said Livio Ribeiro, an economist at BRCG and researcher at FGV Ibre. “Trump has said he wants to increase domestic U.S. oil production. This could create some confusion, with direct and indirect channels. There is also a bloc-related issue. Could China buy less Brazilian oil because we are more aligned with the United States and purchase more Russian oil? This is also a possibility, albeit very indirect. The primary channel should be a price adjustment due to U.S. policies. This could lead to reduced profitability, but not a reduction in Brazilian oil production volume.”

According to SECEX, China is currently the largest destination for Brazilian oil exports, accounting for 45.8% of shipments. The U.S. ranks second with 12.6%, followed by Spain with 10.4%. In the soybean market, China plays an even more dominant role, absorbing 73.1% of Brazil’s exports, with Spain in a distant second at 4.4%.

Data from the Chinese government underscores Brazil’s importance as a commodity supplier. Among Chinese imports, Brazil is the leading source of soybeans, the second-largest for iron ore, and the sixth for oil. However, China’s oil imports are more diversified; Brazil’s share of Chinese soybean imports stands at 73.8%, while its share of oil imports is just 6.8%.

Mr. Castro of AEB highlights significant uncertainty surrounding global trade from 2025 onward. He also notes that oil prices remain highly sensitive to potential disruptions, including new conflicts or production decisions by the Organization of the Petroleum Exporting Countries (OPEC).

In the short term, Mr. Cordeiro suggests that Brazil is likely to maintain export surpluses if production continues to grow as outlined in Petrobras’s strategic plans, especially given Brazil’s limited refining capacity.

In the longer term, he emphasizes the growing impact of biofuels entering the market. “The oil exploration agenda is increasingly competing with other priorities, particularly those tied to the energy transition. For instance, Petrobras is likely to enter the ethanol market. We are also seeing oil companies shift their focus toward natural gas and broader low-carbon solutions,” Mr. Cordeiro said.

“While short-term expectations are driven by economic and geopolitical factors, over a longer horizon—around five years—we anticipate a greater impact from the energy transition. This could increase Brazilian production levels and redirect investment flows,” he added.

Mr. Cordeiro points out that Brazil is currently among the world’s top ten oil producers, holding a significant position in the global market. While oil production in 2024 is projected to conclude with a slight decline compared to 2023, it is expected to be the second-largest output in the country’s historical record.

According to Welber Barral, a partner at BMJ and former foreign trade secretary, this production growth has been driven by pre-salt exploration, which now accounts for nearly 80% of Brazil’s oil output. “Despite the relatively high costs associated with pre-salt exploration, Brazil has significantly improved efficiency in this area, enabling higher production levels,” Mr. Barral said.

“However, the challenge lies in value addition. Even with increased production, Brazil continues to export large volumes of crude oil while importing refined oil products,” he added.

Source: Valor Econômico

Sharing is caring!