Ever since we wrote a paper about exporting soybeans, I’ve been following the contretemps between Brazil and the US regarding soybean exports. China is the largest importer of soybeans from these two countries. Since one is Northern and one is Southern Hemisphere, their harvest seasons differ. So in the past the prices switched back and forth as the harvest supplies soared in one country or another, and China bought around the same from each source. The US has areas where yields are large, is a bit closer, and the inland transport for the soybeans is good. Brazil has lots of land planted, overland transport to ports is challenged a bit, and the distance to China is greater.
But now we have ‘exogenous factors’ as the economists like to say. China is in a trade war with the US. So as the second article indicates, China’s government-owned processors are buying some American beans, whereas the private Chinese enterprises are buying more Brazilian beans. The result is that more beans are going to China from Brazil right now. The trade war’s uncertain vicissitudes may mean that Brazil’s sales will become significantly bigger, and China will only buy what it thinks it has to from the US. Geopolitically, it makes sense for China to support Brazil, a developing country with lots of financing needs and less influence in the world. Support might mean good opportunities for Chinese investment and influence on Brazil’s policies internationally.
The outlook is really unclear. We need to keep watching developments in soybean trade.
Author Asim Anand
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