Global Markets: Soybeans – Share of Brazil’s Exports to China Spikes in August

The share of Brazil’s exports destined for China rose to 85 percent in August, 7 percentage points above the previous month. This increase is due to a turn to Brazilian sources by China following the implementation of duties on U.S. soybeans. This has resulted in higher prices for Brazilian soybeans that discouraged purchases by importers other than China.

This trend seems likely to continue and may strengthen in the coming months. At the current level of export share, Brazil’s exports of soybeans to China would reach nearly 60 million tons (year ending January) compared to 54.4 million the previous year, accounting for all of the additional soybeans Brazil harvested in 2018.

Using these projected trade flows and current import forecasts, U.S. trade opportunities for markets outside of China would rise nearly 13 million tons in the coming year compared to 2016/17. In contrast, increased purchases of Brazilian soybeans by China would result in an 8-million-ton decline in potential U.S. and other exporter trade to China for the same period. Any reduction in China’s demand in the coming year will likely be absorbed by the United States because of the duties.

Conversely, an increase in China’s share of Brazil’s exports would reduce Brazil’s sales to other markets and increase opportunities for the United States to ship to these other markets, offsetting reduced sales to China.

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