Brazil set to overtake the US as the world’s largest soybean producer
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American farmers hit by US-China trade conflict and extreme weather
Brazil is racing ahead of the US as the world’s largest soybean producer, as a trade war and extreme weather take a toll on American agriculture. The Latin American country’s newly planted crop is likely to yield 121.1m tonnes of soybeans in early 2020, agricultural agency Conab said on Tuesday.
That is 25 per cent more than the just-harvested US crop of 96.6m tonnes. “This is the first time ever, it appears, that we will have a smaller crop than Brazil,” said Jim Sutter, chief executive of the US Soybean Export Council, a trade promotion body. Soybean flows were caught in the US trade war with China, the dominant importer of the oilseed.
The 25 per cent tariff that Beijing imposed on US-cultivated supplies remains in place as the two countries negotiate new terms on trade and industrial policy. “This unresolved agreement brought a very good momentary opportunity for Brazil,” said Tereza Cristina da Costa, Brazil’s agriculture minister.
Brazilian farmers have planted 36.8m hectares with soybeans, Conab said in its latest monthly estimate. The area devoted to soybeans has expanded by about 1m hectares a year on average over the past decade, some of it into areas of native vegetation. “The increase in soy production in the country is a reflection of the producer believing in the country’s future,” said Rodrigo Pozzobon, a delegate of Aprosoja, a farm co-operative in the Brazilian state of Mato Grosso.
Demand for Brazilian soybeans has supported their price, with supplies at the port of Paranaguá quoted for $363.50 a tonne this week, compared with $348 a tonne on the US Gulf Coast, according to Reuters. Soybean futures in Chicago traded fractionally higher at $8.99 a bushel Tuesday after the US government released grain estimates that also eyed a bigger Brazilian crop. The price was about a dollar below levels before China’s tariff took effect in mid-2018. Charts that Count: can soybean sales fix China’s US trade surplus? The Brazilian real has dropped about 7 per cent against the dollar over the year, increasing the value of soybeans to Brazil’s farmers.
“The strong dollar is really giving a signal to other producers around the world to step up their production if they can, because it’s giving them pretty good prices, and the strong dollar is kind of having the opposite effect on US producers,” said Mr Sutter. President Donald Trump last week threatened to impose tariffs on steel and aluminium from Brazil and Argentina in response to weakness in their currencies that he said was “not good for our farmers”.
Argentina is the world’s third-biggest soybean producer. US farmers intended to plant 84.6m acres (34.2m hectares) of soybeans last spring, down 5 per cent from 2018. After relentless rain and mud bogged down seeding equipment, they planted only 76.7m acres, according to the US Department of Agriculture. “The market sent a signal to the US farmer: plant less soybeans.
And they did that. Then Mother Nature came after that and said plant less of everything,” said Pedro Dejneka, partner at MD Commodities, an agribusiness consultancy. Soybeans are processed into livestock feed and vegetable oil. The US and Brazil have historically exported in opposite halves of the year, reflecting the growing seasons of the northern and southern hemispheres. Permanently altering this pattern in response to the trade war would be costly, said Joseph Glauber, a senior research fellow at the International Food Policy Research Institute. “I think the world would prefer not to. We’ve grown a very efficient system, with production that occurs every six months,” he said.
Source: Financial Times
Post available in: English