2023-08-04 18:15:57
The world soybean market is dominated by a major buyer: China and a major seller: the United States. For years, Brazil has captured an ever-increasing share of that US trade.
Now, Brazil is beginning to dominate the market, pushing the US back. Announced this Friday to Bloomberg.
Chinese buyers are snapping up Brazilian soybeans for delivery in October, a time of year when US exports are typically at their peak, according to people familiar with the business.
The sales come at a time when Brazil is reaping a record crop and offering much lower prices than rival producers. They also reflect President Luiz Inacio Lula da Silva’s plan to pursue closer relations with China as part of his growth plan for Latin America’s largest economy.
US farmers are losing their competitive edge in global agricultural markets as Brazilian production expands. Geopolitical tensions have also prompted China to seek deeper ties with the South American nation and reduce its historical reliance on the US.
Lula’s plan to deepen relations with China includes obtaining more resources from the Asian country and reducing the dollar’s role in foreign trade transactions. The trip of a Brazilian delegation to China at the beginning of this year yielded more than 15 agreements worth around US$ 10 billion in promises of Chinese investments.
It is currently profitable for Chinese processors to crush Brazilian grains to make cooking oil and animal feed, while margins are negative for US supplies, show data compiled by Bloomberg. As a result, Chinese buyers are buying Brazilian cargoes of soybeans early in the season.
In fact, the purchases were so anticipated that there are already five ships scheduled to receive cargo in Brazil in September, according to the maritime agency Alphamar. This is the first time of the season for this type of trade, shipping data shows.
“There are large stocks on the farms now that will arrive at ports in the coming months, so we will see more ships on the schedule soon,” said Arthur Neto, commercial director at Alphamar.
The purchases also come as US crops, which are normally harvested from September onwards, are under pressure from hot, dry weather. In June, the US soybean crop was in the worst condition in three decades before the rains returned.
Still, the weather is set to get warm and dry again. Chicago soybean futures are up more than 5% this quarter to around $14.20.
“From a weather perspective, the chance of an improvement in crop conditions is not high,” Chinese brokerage Huatai Futures said in a report on Friday. “Supply of the new US soybean crop is unlikely to expand much.”
#Brazil #pushing #worlds #biggest #soy #market #China