Demand for U.S. soybeans will continue to go up and Brazil can't compete, says strategist

Peter Zeihan shares his thoughts on global trends affecting agriculture.


By Betsy Freese, Successful Farming - 1/5/2021


Ahead of the 2021 Land Investment Expo on January 12, geopolitical strategist Peter Zeihan shares his thoughts on the global trends affecting agriculture, land values, commodity markets, and politics. Buckle your seat belt.


SF: What are your predictions for the COVID-19 pandemic in 2021?


PZ: The virus wonít go away until 80% of the population have either had it or had the vaccinations. We will have four vaccines in production and start mass inoculation of the population by April 1. The Johnson & Johnson vaccine is the one I am really interested in because you only need one shot, and it doesnít require freezing. Everyone who wants to get vaccinated will be by June.


We can then start talking about the economy repairing, because we will have been offline for more than a year. It is a real recession with real damage. We can start getting back to what I call normal in September. That is too late for the global system.


SF: How has the pandemic affected demographic and economic trends?


PZ: For a lot of countries that had rapidly aging populations, they will flip into mass retirement a year from now. The older, consumption-led economies are becoming export-led. The export-led economies are becoming post-growth. This is the end of globalization, right now. Most countries will never get back to where they were in January 2020.


†For agriculture, it means sales to China have peaked and they will only go down until there is a collapse of the Chinese communist system. That could be in one year or five years, but it will happen.


The Chinese have decided that they will never purchase any American goods ever again if they have a choice, particularly agricultural goods. The patterns we have become used to in the last 40 years are gone and itís time to learn what the new world is going to look like.


SF: Who will be the winners in the global food market?


PZ: Itís going to depend on which products you are in. If you bet the farm on China, you are going to lose the farm. I warned you about that last year. If you have people in China, itís time to bring them home because otherwise they will be arrested, and you will never see them again. We are at that point. This is the year that this all happens.


Many countries that are significant competitors for American agriculture will face problems because we are looking at capital breakdown at the same time we have a supply breakdown. The U.S. doesnít have to worry about that. Our capital structure and supply chains are more stable. On the production side, I donít have any concerns.


The problem is who you sell to. China is gone. The UK has 66 million customers who are about to lose access to one-third of their food needs when they leave the EU. Another third of their food needs are not competitive with American ag, so ag will be at the core of a UK trade deal. We have the UK, Mexico, Japan, and Korea, but after that you are going to have to find new markets.


SF: Land values continue to go up. Do you see that continuing? ...


SF: Letís talk about trends in ag commodities ...


SF: How about corn? ...


SF: What about the future for soybeans?


PZ: I expect soy demand around the world to go up, up, up. In a poorer world where people canít afford animal protein, soy is the only solution that can be produced in bulk.


The more problems Brazilians have, the more room there is going to be for U.S. soy. Brazil is a high-cost producer. If there are any supply chain problems anywhere in the world, Brazil gets hit. It is the most expensive production out there. Brazil is not a long-term competitor. That doesnít mean it is going to collapse this calendar year, but it will collapse.


SF: How about wheat? ...


SF: Any positives for beef?


PZ: Beef is a bit more mixed, but still broadly positive. The Japanese and the Korean demand is stable to declining as the demography ages. Mexico is well positioned to pick up the rest. I see no reason why Mexico will not economically do very well in decades to come. In Mexico, beef is the first protein you go for when you have money, unlike China, where pork is a luxury product and something you cut from your diet in hard times. Mexican beef is nasty, and they prefer American beef. British beef is also wretched. Most of the beef consumed in Great Britain comes from mainland Europe, and that is going to stop. The U.S. gets two big beef consumers.


SF: Letís talk politics. What will change with the Biden administration? ...


SF: How could this affect U.S. farmers?


PZ: Nobody in the Biden cabinet cares at all about foreign affairs. That could be a problem for agriculture, because all of a sudden you have lost the group that used to do the lobbying for you, and the new coalition is really not interested. With the possible exception of the United Kingdom, there arenít going to be any American efforts for trade deals. You are going to lose China. You will probably gain the United Kingdom.


SF: Any final thoughts on politics? ...


SF: Will Trump have an influence on the world stage after he leaves office? ...


SF: You mentioned the media. What is the future for media? ...