With Super Crop in 2020, Brazil Reclaims World Soybean Throne

RIO DE JANEIRO, BRAZIL – The Brazilian countryside is stepping on the gas. Soy, the country’s main export product, is experiencing a boom with a harvest that is about to reach a record level.

More than 126 million tons of the grain will have been harvested in Brazil by the end of the 2019-2020 season (which ends in August), 7.6 percent more than the previous harvest, according to estimates by the United States Department of Agriculture (USDA).

As a result, the country will reach first place in the ranking among the world’s leading producers, replacing the United States, whose farmers reduced their crops because of the trade war with China – the main consumer of the legume, with 30 percent of world demand – and the intense rainfall recorded last year.

“We will be a world leader for many years,” says Bartolomeu Braz, president of the Brazilian Association of Soybean Producers (APROSOJA). It’s not the first time that Brazilian soybeans have achieved this mark. The South American giant’s harvest exceeded that of the United States in the 2017-2018 season, according to data from the USDA, which has been collecting information since 1963.

But at the time, the difference was minimal: 1.6 percent more. Now, the distance between first place (Brazil) and second (US) is 30 percent. In addition, the country is positioned as the leading exporter of grains on the planet, a title earned in the 2012-2013 season. The rise was no accident.

Soy has become the grain of the century. Demand has not ceased to increase since the start of the millennium and its growth rate exceeds that of other seeds. The product’s versatility has been the key to its success. The whole pod can be eaten with vegetables or incorporated into tofu.

Milk, sauces, flour and cooking oils are produced with the legume. But above all, it is used in the production of food for poultry and livestock. For instance, 87 percent of soy imported into the European Union goes into animal feed production, according to Greenpeace.

But in this story the great facilitator could not be another: China, which, given the current fragility of the Brazilian real in relation to the dollar and the global uncertainty, is now anticipating purchases.

So far this year, the real has depreciated more than 24 percent against the US currency. Meanwhile, Brazilian farmers have already sold (by March this year) between 60 and 65 percent of this season’s crop, according to a USDA analysis.

In that context, the food futures market was plunged into a roller coaster by the coronavirus. “A good harvest combined with competitive prices is a relief for the Brazilian countryside at this time … This will help the country navigate troubled waters,” says Daniele Siqueira, an expert in raw materials from the AgRural consultancy.

Soy exports, as well as being a major source of foreign exchange, have a domino effect on several economic sectors, say experts from the National Supply Company (CONAB), an organization linked to Brazil’s Ministry of Agriculture.

But not everything is a bed of roses. “So far we are exporting at a normal rate; however, if the coronavirus pandemic worsens, we are not sure what will happen in the coming months,” Siqueira says. The AgRural estimates that foreign sales will reach 70 million tons this season (of which almost 80 percent would go to China), while last season they were 74 million.

The reduction is due to global uncertainty and the fact that the Asian giant has granted some tariff exemptions to several imports (including soybeans) from the United States, after the two countries reached a trade agreement late last year.

China has been concerned about food security challenges that may be caused by the coronavirus pandemic.

According to Wei Baigang, director of the Planning and Development Department at the Ministry of Agriculture and Rural Affairs, at a conference last Saturday, the country will closely monitor the logistical situation in Brazil, Argentina and the US to mitigate potential interruptions in shipments of agricultural products due to the crisis, reported Bloomberg.

Recently, the country urged its citizens not to accumulate grain, after a recent ban on new rice exports by Vietnam triggered concerns over global supplies. Wei said China has enough rice and wheat stocks for one year’s consumption, while grain imports are only about two percent of domestic use.

“Market supplies are extensive and there is no need to accumulate,” the director said. He also stressed that Brazilian soybean exports to China remain regular with an increase in shipments in March.

Wei also highlighted the increase in soy imports from the United States this year, as part of the first stage of the trade pact signed between the two countries, at a delicate moment for Brazil, which is experiencing a diplomatic crisis with the Chinese government.

Education Minister Abraham Weintraub implied on social media that the Asian giant could benefit from the Covid-19 pandemic. He deleted the post, but the Chinese Embassy in Brazil is asking for an apology.

Trade Pacts

In the first stage of the US pact, China, which is Brazil’s main trading partner, has committed to increasing its purchases of US agricultural products by US$32 billion (R$170 billion) over the next two years.

Among the food products benefited are soybeans, meat and other major products on the Brazilian agenda. The United States intends to recover the ground lost after the setback caused by the trade conflict. In 2019, China imported only 16.9 million tons of soybeans from the United States, two percent more than in the previous year, but almost half of what it bought in 2017, according to data collected by the Reuters agency.

The agreement between the two powers will marginally increase global exports of US oilseeds and, in contrast, depress the growth of Brazil’s, according to an analysis by the University of Missouri’s Research Institute for Agricultural and Food Policy (FAPRI).

“I am skeptical about this approach,” argues Joseph Glauber, a researcher at the International Food Policy Research Institute. “China has maintained that the agreement would not adversely affect other suppliers, including Brazil,” he says.

But if that happens, he says, Brazil could lodge a complaint with the World Trade Organization. Nevertheless, production will not stop. “We explore several markets, such as India, Indonesia and Vietnam, to diversify our sales,” concludes Braz, from the APROSOJA.

Impact on the environment

Brazilian grain production will grow 27 percent over the next decade, according to the Brazilian Ministry of Agriculture. The boost will come from the soybean and corn harvests. Meeting that expectation could result in environmental damage, several organizations caution. According to Greenpeace, the soy industry now focuses on converting enormous expanses of savanna and scrubland into cultivable land, a very environmentally rich area that is 1,000 km from the Amazon.

This biome has lost half of its original extent due to the expansion of agriculture and is undergoing one of the worst deforestation crises, according to the World Wildlife Fund. The Brazilian government reported in December that the loss of vegetation cover in the savanna between August 2018 and July 2019 was 648,400 hectares, which continues the alarming levels of recent years.

The Gran Chaco – the second largest forest in South America, which extends through Argentina (the world’s third-largest soy producer), Bolivia and Paraguay – is suffering high rates of destruction. The South American soil is a key player. This year, 57 percent of the soy the world will consume will be produced there.