An article published on the CME Group portal suggests that by 2025, China could meet nearly all of its soybean needs with imports from Brazil. This shift would come at the expense of current purchases from the United States, estimated between 20 and 22 million tons for 2024. The analysis, authored by AgResource, a U.S.-based agricultural commodities consultancy with a Brazilian office, was featured by CME, which controls the Chicago Board of Trade.
The intensification of trade between China and Brazil, especially in the global soybean market, will be impacted by politics, the article states. The authors warn that in the long term, politics will play a more significant role in the growth of global soybean trade. They note, “This centers on U.S.-China trade relations, which have undoubtedly soured and are unlikely to be resolved regardless of who is president in January 2025.” The article also highlights that China is by far the world's largest importer and consumer of soybeans.
In the short term, AgResource emphasizes the importance of Brazil's soybean production and export volumes in 2024. The report notes a lack of consensus on the current Brazilian soybean crop size. However, it confirms that South America's crop and surplus will be substantial in any scenario, despite a “discrepancy” of 6.3 million tons between Brazilian government estimates (CONAB) at 147.7 million tons and USDA projections at 154 million. The article also mentions varied market predictions, with some forecasting Brazil's 2024 soybean production at 140 million tons or less, while others expect it to exceed 155 million tons.
AgResource argues that a Brazilian crop below 145 million tons would mean the U.S. would dominate the global trade from September to December. Conversely, a crop above 155 million tons implies little need for increased production in the U.S. or elsewhere. So far, the Brazilian spot market aligns with the government's estimate of 147.7 million tons.
The consultancy believes that while China would prefer to import soybeans exclusively from Brazil and Argentina, this will not happen in 2024 but possibly in 2025. Nonetheless, China will not import more from the U.S. than necessary. This belief is reflected in USDA’s May numbers, where China usually secures at least one million tons of U.S. soybeans for the following marketing year, which did not happen for 2024/25.
Extreme Dependence
According to Giovani Ferreira, director of Canal Rural Sul, Brazil's current production of around 150 million tons and exports of 100 million tons, as seen in 2023, indicate that the country cannot and does not want to expand exports to China. Currently, over 70% of Brazil's soybean exports are destined for China, amounting to over 70 million tons last year. This dependence is concerning for Brazilian producers, Ferreira notes. “Despite the growth in production, Brazil's intent has always been to diversify its market. However, this has not succeeded as exports to Chinese ports have only increased in recent years.”
Besides China’s appetite for Brazilian soybeans, other aspects of demand need consideration. Domestic consumption is growing, particularly for biofuels and animal feed, increasing competition between domestic use and exports. In the 2022/23 cycle, of the 154 million tons produced, 102 million were exported, 52 million were processed for biofuels, and the ending stock was 3.3 million tons. For the 2023/24 cycle, the estimated production of 147.6 million tons is expected to decline further to 145 million tons due to flooding in Rio Grande do Sul, Brazil's second-largest soybean-producing state. With established domestic demand, the country will need to ration exports.
In May, Brazil’s total soybean complex exports were lower in 2024 compared to 2023, dropping from 18.5 million tons to 15.7 million tons, driven by a decrease in soybean grain exports from 15.5 million to 13.4 million tons. Any additional demand from China would have to come from the exportable surplus, meaning reducing exports to other countries rather than domestic consumption, which is not Brazil's intention. With a smaller crop in the 2023/24 cycle, Brazil is expected to export less soybeans in 2024 than in 2023, with estimates ranging from 98 million tons (USDA) to 92.5 million tons (Conab/Brazil).
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