Weakness of the Chinese economy interferes with Brazilian agribusiness – 08/14/2023 – Vaivém

The weakness of the Chinese economy that occurred in the second quarter, if it persists, will interfere with Brazilian agribusiness. From April to June, the indicators pointed to an evolution of only 0.8% in GDP (Gross Domestic Product). The country is used to rates well above that.

And the signs at the beginning of the second half are also of falls in employment, in civil construction, in services and in exports. Just as it is good for China when agricultural activity in Brazil is doing well, it is good for Brazilian agriculture when the Chinese economy is also doing well.

The level of dependence between the two countries in this sector does not allow for retractions on either side.

The Chinese, due to high demand, are important in sustaining international prices, which have already been slowing down this year. As they are the main importers of various Brazilian products, they end up generating income for national producers.

In the 2000s, China was the destination for 3.5% of Brazilian agribusiness exports. In 2015, they were already 28%, rising to 37% in the first seven months of this year. Of the US$ 97 billion in revenue received by Brazil up to July, 37% came from China.

The Chinese appetite has always been focused on soy. In recent years, however, there has been diversification. They also became important in the purchase of other foodstuffs, such as meat, but also increased the purchase of cotton and cellulose.

The ten main products in the Brazilian agribusiness export basket represent 88% of all sector revenues. The Chinese account for $35 billion in this top ten ranking, accounting for 41% of the total.

Far away from China, the list of major importers from Brazil includes the United States, the Netherlands, Japan and Indonesia. The Americans, second in the ranking of the ten main Brazilian agribusiness products, left only 10% of the amount spent by the Chinese.

Soy is, by far, the main product purchased by the Chinese. They keep 70% of Brazilian exports. From January to June, 50.4 million tons of the oilseed went to the Chinese market out of the 72.5 million sold by Brazil.

China’s preference for soybeans is evident in soybean meal imports. Even though Brazil temporarily assumed world leadership in this product this year, the Chinese purchased only 1% of the soybean meal exported by Brazilians.

In the case of soybean oil, due to difficulties in supplying similar products, such as sunflower oil from Ukraine, Chinese purchases reached 12% of Brazilian exports.

Some important products in Brazil’s export basket, such as coffee and orange juice, have little attraction in the Chinese market. China’s economic scenario does not interfere in these sectors.

Others, however, such as meat, depend heavily on Chinese demand. The sector’s total exports amounted to 5.1 million tons this year, excluding by-products and by-products, up 6%. Revenues, however, fell 7%, according to the Ministry of Agriculture.

The volume of foreign sales of chicken and pork increased, but beef, with the reduction of China’s market share, fell 4% compared to the same period last year. In terms of revenue, the sale of beef had a 23% decrease. The average price per ton, which was US$ 5,921 in 2022, dropped to US$ 4,750 this year.

Some sectors, although with a low share in the total Brazilian trade balance, depend heavily on the Chinese. Peanut oil exports have been growing thanks to purchases from the Asian country. This year, the Chinese accounted for 85% of Brazilian foreign sales.

Corn, absent from Chinese purchases until last year, entered the list this year. China has already imported 2.25 million tons of this cereal in the year, 12% of the total exported by Brazil. The Chinese participation prevents further falls in prices on the domestic market.

Outside the food sector, cellulose and cotton are also highly dependent on the Chinese market. Until July, 48% of Brazilian pulp exports went to China, while cotton exports reached 13%.

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