Soy: Coronavirus not seen as risk for Brazil yet


By Josť Roberto Gomes, Argus Media

11 February 2020


The spread of coronavirus in China is not yet seen as a risk for Brazil's soybean exports, but the outbreak could lead to less soybean import demand from Beijing and a potential preference for meat imports, depending on how long the outbreak lasts.


Market participants, trading companies and industry associations have not identified any impact on Brazil's exports so far. But uncertainty remains.


Globally, more than 40,000 people have been infected by the coronavirus, with more than 1,000 deaths confirmed. The vast majority of the cases occur in China, which is Brazil's most important trade partner.


In 2019 China was the destination of 28pc ($63bn) of Brazilian exports, with soybeans, beef, pork, and poultry among the main drivers. About 80pc of China's total 2019 soybean imports came from Brazil.


Brazilian farmers have already hedged more than 50pc of the expected 2019-20 output, an increase from previous years. This is seen as evidence that China will be present in Brazil's export market in the first half of the year.


Market participants said that only last week China bought in advance more than 1mn t of the commodity for shipping until July.


Traditionally, the Brazilian oilseed tends to be more competitive between February-July, following the harvest in the country, which started last month. The South American nation is poised to produce a record of around 123mn t of soybean this cycle.


There is some speculation in the market that China will use this coronavirus outbreak as a strong argument to not fulfill the "Phase 1" trade agreement signed with the US in January. According to the deal's terms, Beijing will buy $200bn of US energy, agricultural and other products and services in 2020-21.


Doubts on how feasible this trade agreement is have been on the radar since then, with the coronavirus adding more concern. Chinese authorities may pledge for some flexibility from the US as a result of the outbreak.


The soybean price for March delivery fell by almost 10pc trought January in the Chicago Board of Trade (CBOT), erasing earlier gains generated by the US-China trade deal.


More meat? ...


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