Sunday , May 22 2022

With a commercial war, Brazilian exports are the highest in five years


A trade war between the United States and China, whose outcome is still unpredictable, has increased Brazilian exports. The projection is that the sale of domestic products abroad will end in 2018, and the best result in five years.

By October exports amounted to $ 199.1 billion. At this pace, analysts expect to close a year above $ 230 billion – the highest level since 2013. The 2011 annual record was $ 256 billion, according to the Ministry of Industry, Foreign Trade and Services (Mdic).

The increase in exports increases the number of jobs in the involved sectors and partly compensates for the slow recovery in the domestic market. In addition, it brings more dollars to the country, improving the balance in external accounts.

"A few months ago, the exports would be close to $ 218 billion," said Jose Augusto de Castro of the Brazilian Foreign Trade Association (AEB), who is favored by the commercial war.

The government of Trump imposed import tariffs and quotas on several partners to reduce the trade deficit – when the country buys more than it sells. The Chinese, with whom this deficit is higher, were charged on imports to force Asia to make concessions. This policy, which China felt, led the two countries into a commercial war.

The struggle changed the course of the store. Brazilian soybean sales in China were used when the Asian country imposed a 25% tariff on US grain. The US exported 40 million tons to the Chinese; Brazil, about 50 million. By August, the export of Brazilian soybeans increased by 20% compared to 2017. In addition to soy, Brazil benefited from rising oil prices.

However, Brazilian industrial goods did not. While the share of primary goods in exports increased by almost three percentage points in the first nine months of this year, the share of industrial products in sales fell by one point.

Among the experts, there is a doubt as to how long this favorable export period will last. "The window is narrow," says Lia Valls of FGV. "In 2019, with the expected increase in US tariffs, there will be an aggressive response from China, which will lead to more protectionism."

Michael McDougall, vice president of the American consulting firm ED & F Man Capital Markets, has a different attitude. "Negotiations between them (the US and China) will be postponed, so Brazil has the opportunity to export more to China and should use this expansion, for example, soybeans, because it will take years for Chinese to diversify oil supplies," he said .

"Soybean sale still underground"

With the scenario suitable for Brazil's Brazilian grain exports, soybean producers are increasing the expected sale of the harvest that is still planted in the main production regions of the country. At least half of the future production of 3,000 hectares by Silvio Malutta's producer had only planting in the cultivated areas of Fazenda Fratelli in Itapeva (SP), has already been sold. "I sell soybeans that are underground because in many fields the seeds have not yet been given," he says. Experienced, the manufacturer already knows that about 80 bags per hectare should be collected. "We anticipate a sale in order to recover the money invested in planting. For a part that was sold three months ago, with a dollar more, I managed to stop the price of a $ 81 bag on the farm." Since then, the scenario has deteriorated slightly, "he said.

Malutta sees not only the advantages of Brazilian soybean in a trade dispute between the United States and China. "At first, I believed that this fight would be interesting for us, but now I have doubts. Americans can sell to Europe and we can lose partners. China is a big market, but it's bad to depend on one buyer," he said. He estimates that soybean prices have risen due to the dispute, but they did not stop because they, with less sales of American soybeans, increased inventory. Last Wednesday, July 14, the soybeans that were shipped to the port of Santos, without cargo, were $ 75 for a bag.

Mauricio Fernandes Dias, from Capituva Pharmacy in Tacariva, has already sold nearly 70% of the soy that he just planted. "I used the advantage of the dollar, which reached $ 4.30. At that time, the future sale is not very good," he said. Dias estimates that the impact of a commercial war was below expectations. "This year we expect a better price for soybeans. We closed the sack on an average of R $ 78 compared with an average of $ 73 last year, as the dollar has grown in relation to the real one." It recalls that production costs have increased.

The producer is one of those who bet on a favorable scenario for Brazil's soybeans, motivated by the expectation of an increase in the consumption of cereals in the world. In the Itapeva region, Dias has expanded the soybeans with 3,800 hectares in the last harvest of 5,000 hectares.

The Itapeva region is the one that produces the worst in the state of Sao Paulo. It has 196,000 hectares, with the production of 11 million sacks. São Paulo is the eighth country among countries in the production of soybeans, led by Mato Grosso. There, with 90% of the planted holdings, the producers have already sold 35% of the future production, which is 3% more than in the previous culture, according to the Institute for Mato Grosso Applied Economics (Imea).

According to Named, future sales are accelerating between September and October, and the dollar is higher. This happened even in the federal government's customs tariffs after a truck strike in May, which increased costs for manufacturers.

According to Nelson Schreiner Junior, president of Nutriceler, a fertilizer company, the recent variation in soybean prices due to commercial war was not drastic. "The commodity market is very vulnerable, it's normal that, given every speculative fact, the manufacturer sells at high moments," he says. "But increasing productivity and reducing costs are also important points in increasing profitability." Junior, who is also a producer, says that he learned from his father, an experienced farmer, the strategy of selling a part of production in the future market and part only after harvest. "He was always right on both types of sales," he said.

Agreement on the US and China

Family farms Linn Rohrscheib in Fairmont, Illinois, had good soybean plants in 2018, but all the production went to the storage area. "Most of us are trying to put as much as possible. In the case of my operation, we are practically with our entire soybean harvest in 2018, waiting for prices to be sold," he said. As chairman of the Soil Producers' Association in Illinois, one of the best state grain producers, Linn says some are worse: "It was a challenge for those who do not have enough storage space within the farm,.

US soy farmers were directly affected by the collapse of a hand between Washington and Beijing in a trade war led by President Donald Trump. Hoping for political exit, they are collecting soybeans that the US government will rapidly agree with the Chinese to sell it to them.

China is the world's largest importer of soybean, which is the main buyer in the Illinois region. In the United States, as a whole, 30% of crops are envisaged for the Asian country. However, this year Beijing imposed a 25% tariff on US products list – including soybeans, which pushed the price of the bag from April. This move is a reaction to tariffs imposed by the government on Chinese products.

Trump will meet with Chinese President Xi Jinping in Argentina later this month before the G20 summit. The expectations of American manufacturers are that the two will reach a consensus to alleviate the situation.

On Friday, July 16, the US leader said the Chinese government was not willing to conclude an agreement. A day earlier, US Commerce Secretary Vilbur Ross said the idea was to discuss only the structure of the agreement that would be completed only in the future. According to him, the United States is still planning to increase Chinese import tariffs and it would be "impossible" to reach a final agreement in January.

"When we start to see that the price will rise, even if we do, we start selling. We want an empty storage space by 2019 (June)," says Linn. The US Agriculture Minister announced in August the $ 3.6 billion homeowned soy farmers affected by the trade war, part of the 12 billion dollar commitment. According to the US government, the intention is to "buy time" while Trump is negotiating "permanent trade agreements".


But the struggle of the manufacturer is precisely against time. The biggest fear today is that the lost market will never be recovered, with the replacement of other countries, such as Brazil. For Tarso Velos, ARS analyst Mercosul from Chicago, who is consulting in Brazil, although the government has reached an agreement, there is no guarantee that the United States will make room on the Chinese market. "In the long run, other countries are encouraging the production of soybeans and Americans are losing this trade. Today, soybean production has been stimulated in Brazil, in Argentina, and the US producer is reducing its planting because there is no one to sell," says Veloso. For him, the Brazilians were the biggest winners of this commercial war.

Linn says his generation of producers never had a similar situation, but he recalls his father's stories about a "moment with the Russians" – in connection with a grain embargo set up by Jimmy Carter in 1980 on the Soviet Union and falling prices production.

The situation is not only an economic problem in the US but political and social. Linn says that adjustments have already begun, and most manufacturers have changed their profile of spending and services, led by local communities. "We are all looking for ways to reduce our costs because we do not make money, we will not buy new equipment, we try to solve our problems on our farm and at home, and small businesses in rural areas are undermined," he said.

The Washington-based research firm Brookings Institute points out that nearly 1.6 million people work in industries that are exposed to the effects of a commercial tariff war with China – three-quarters of that number in food, farm, or fisheries production. In the rural areas of the United States, according to the study, 1 to 33 workplaces are exposed to the impact of tariffs. In big cities, the number drops to 1 in 200.

The expectations of the manufacturer of a political solution lie in the fact that rural areas provide important support to the Republican Party – and Trump – but are punished for foreign trade policy. "We are waiting for a resolution on these tariffs or other uses for soya that will help us through difficult times, with an increase in blending biodiesel or an increase in animal production." The manufacturer can not continue to produce without the ability to earn from its production, "says Linn.

"There is not a viable alternative that needs to be done immediately. What usually happens is a gradual replacement of one production by another, but in this case it was sudden." What the US producer wants is a government to reach an agreement, "says the analyst in ARC Mercosul.

The soybeans do not react well to storage

The strain is not like corn. It does not respond well to storage. If hypertension is not maintained, the grains quickly abrupt and lose, losing their value.

"The grain smells like a dead animal on the road and has the consistency of potato, smooth and dense," said Vaine Humpreis, a farmer from Iowa.

But Humphreis keeps his crops in the silo: "This gives you a little control."

In the case of some agricultural producers, there is no other choice than to keep the harvest. Millions of borsels (measures equal to about 27 kg of soybeans) do not have a buyer. Terminals in Portland, an important output exit for China to the northwest of the Pacific, are rarely open. Supply is hampering terminals and elevators, even in the cold, damp climate in North Dakota, leaving many hectares of illegal crops. Soybean soybeans are more than doubled, and at the end of this year's harvest, up to 955 million bushellers are added, according to the Department of Agriculture.

Robb Evoldt, who planted his farm since 1996 in Iowa, has for the first time kept his own soybean for 15 years. His culture is usually followed by the Mississippi River in ships exported to China and other countries across the Gulf of Mexico. This year, production is stored in silos.

Illinois, the largest soybean producer in the United States, most falls short of the lack of storage, said Tim Brusnahan, broker and broker Brock Associates analyst.

Meat also benefits

A trade war between the United States and China has not only used the export of soybeans. According to cattle, the latest data from Brazil's refrigerator association (Abrafrigo) show that China made 44.1% of Brazil's exports in October – compared with 37.1% in the same month last year. For China and Hong Kong, 585,263 tons were delivered last month, from 448,721 tons in the same period of 2017.

In the period from September to September, the progress is very pronounced: 56% of the larger consignment of beef in China, with an additional sales of 68%, according to the Brazilian Association of Meat Exporters (Abiec). Only in soybean in October exported 5.04 million tons, which is 132% more than in the same month of 2017, with revenues amounting to 1.98 billion dollars, an increase of 141%.

"Brazilian soybean exporters have already taken on wealth in a trade war," said Michael McDougall, vice president of the US consulting firm ED & F Man Capital Markets, who attended a summit in Agribusiness on Tuesday 2018. He said he believed in a trade war far from ending because of the aggressive character of US President Donald Trump. "Instead of investing in diplomacy, Trump is investing in weapons, increasing the military budget," he stressed.

But there are some domestic risk factors that can ruin this scenario. One point of attention is the definition of a foreign government's foreign policy. The sector is aware of the views and statements made by President Jair Bolsonaro (PSL) in relation to China – as the then presidential visit earlier this year in Taiwan, which Beijing estimated as a rebel island. In early November, Bolsonaro, who was already elected, met with China's Ambassador to Brazil, Li Jinzhang, to calm his mood.

He sought Wednesday 14, as Minister of Agriculture Teresa Cristina, to avoid giving statements about the effects of the US-China trade war on Brazilian exports. However, in an interview last week, he stressed the importance of dialogue. "Dialogue is crucial. The president must clearly indicate which international policy he wants to adopt," he said at that time. Information from the newspaper O Estado de S. Paulo.

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