Brazil forced to import soy as China expands its appetite

. Jul 15, 2020
soy farm brazil Soy farm in Chapadão do Sul, Mato Grosso do Sul. Photo: Lourenço LF

Brazil is one of the leading producers and exporters of soy in the world, yet data from June showed that the country is now importing the oilseed at the highest level in four years. A report from economic research institute Cepea explains that soy exports broke records in the first half of 2020, which, along with droughts in the south of the country, caused shortages for local companies, forcing them to buy in from Mercosur partners.

</p> <p>Undeniably, one factor contributing to Brazil&#8217;s record exports is the appetite for soy in China. According to data by Brazil&#8217;s Economy Ministry, Brazil exported 60 million tons of soy in the first half of the year — 43 million of them to China.</p> <p>Reuters news agency also <a href="">reports</a> that June&#8217;s soy imports rose to 11.16 million tons in China, 71 percent above 2019 levels. The jump was fostered by Brazilian soy, which sources reported to be cheap at a time when Chinese processors began reestablishing their activities.&nbsp;</p> <div class="flourish-embed flourish-chart" data-src="visualisation/3186887" data-url=""><script src=""></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/3186908" data-url=""><script src=""></script></div> <p>The latest crop bulletin by the National Supply Company (Conab) puts average soy prices at BRL 93.9 per bag, 36 percent more expensive than the same period last year. However, back then, the USD traded at BRL 3.85, on average. It stands at around BRL 5.35 now.</p> <p>Conab believes exports will continue this fast pace for the coming months, expecting 7 million tons to be sold in July as advanced purchases for the 2020/2021 season are already being traded. In total, 80 million tons of soy will be shipped abroad and 46 million will be used for internal consumption, says Conab.</p> <h2>Soy: the driving force of Brazil&#8217;s economy</h2> <p>The good news in the field reflects on the entire productive chain of agribusiness. The Santos Port Authority, responsible for managing the largest cargo hub in South America, reported it had shipped a record of 70.3 million tons of goods in the first half of 2020, despite the great strain the Covid-19 pandemic caused on global supply chains.&nbsp;</p> <p>The performance was a result of a 13.6 percent increase in exports, mainly down to sugar and soy complex — which includes oil and soy meal. While sugar exports jumped 40 percent to 8 million tons, soy reached an impressive 22 million tons — a 27 percent increase versus the previous year.&nbsp;</p> <div class="flourish-embed flourish-chart" data-src="visualisation/3186987" data-url=""><script src=""></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/3187026" data-url=""><script src=""></script></div> <p>“The port’s good numbers reflect the strength of agribusiness and the favorable effect of the foreign exchange rate over exports,” SPA chief executive officer Fernando Biral <a href="">was quoted as saying</a> by magazine Época Negócios. </p> <p>At a time when the grimmest projections for Brazilian GDP expect a plunge of up to 10 percent this year, agribusiness remains as important as ever for the country’s economy and such <a href="">booming results</a> could mean an increasing share in the overall output.

Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

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