Dark clouds gather over Brazilian soyabean farmers
China’s swine flu outbreak and possible trade detente with the US unsettle producers
Bryan Harris in São Paulo and Tom Hancock and Wang Xueqiao in Shanghai, Financial Times
May 13, 2019
For Adriano Gomes, 2018 was a banner year in the Brazilian soyabean market. “We saw the brakes explode here in Brazil,” says the analyst at consultancy AgRural. He adds that exports rose from 72m tonnes in 2017 to more than 85m tonnes in 2018 and attracted the highest prices in local currency since 2007. “[It] was an exceptional year.”
The success reflected a multiplicity of factors, not least growing Chinese demand for soyabeans. As China has grown richer, its consumption of meat has increased. This has led to a rise in demand for the soya-based feed used to fatten livestock.
Annual meat consumption per capita in China is 50kg, up from 20kg three decades ago. Soyabean imports, meanwhile, have trebled in the past decade to about 90m tonnes a year — or about five cargo ships a day
This has driven production of soy across vast tracts of the US, Brazil and Argentina. As the trade war between China and the US gathered steam in 2018, however, Beijing increased tariffs on imports of the crop from the US, spurring a dramatic jump in Chinese purchases from Brazil.
Since then, dark clouds have begun to gather in Brazil over the so-called “crop of the century”. Producers have been worried by the spread of African swine flu in China and the likelihood of large scale pig culling, which would depress demand for Brazil’s soyabeans.
As a result of the disease, official figures suggest China has lost 12 per cent of its swine herd this year. Projections by independent analysts are yet more worrying. Financial services company Rabobank says as many as 200m pigs of China’s 360m herd could be culled or die in 2019 as a result of swine flu. This would reduce China’s pork output by 30 per cent, it adds.
Lin Qing, an analyst at Chinese brokerage Jinrui Futures, forecasts that China’s soyabean imports this year will fall by between 5m and 8m tonnes because of the outbreak.
Another factor that could hit Brazilian growers and exporters hard, Mr Lin points out, are concerns about the prospects of a US/China trade rapprochement. Although talks between Beijing and Washington are presently in the balance, whichever way they turn out will be enormously important for Brazil.
“I think everybody is extremely cautious at this point, here in Brazil and everywhere, as we await further development in the China-US situation,” says Pedro Dejneka, partner at market intelligence company MD Commodities…