GT Voice: China’s need for food security makes Brazil more competitive
Published: Dec 21, 2023 11:40 PM
Photo: CFP

Photo: CFP

Brazil is taking a growing share of global agricultural trade away from the US, thanks to the South American country's closer ties with China, one of the world's largest importers of major agricultural commodities, which aims to achieve supply diversification to ensure food security.

While the US will remain an important source of agricultural commodities for China, geopolitical tensions will prompt China to step up diversification efforts to reduce exposure to risks if US-led trade restrictions cannot be resolved.

A Bloomberg report said on Wednesday that Brazil has overtaken the US as the leading supplier of corn to China, with shipments from Brazil amounting to 8.79 million tons in the first 11 months of the year, or 40 percent of China's overall corn imports, according to customs data. 

US shipments came in at 6.5 million tons, almost 30 percent of the total, but down by more than half from a year earlier.

Corn is not the only agricultural commodity that has Brazilian exports to China exceeding those of the US. Brazil's soybean exports have also outperformed those of the US this year. In the first 11 months, China's soybean imports totaled 89.63 million tons, up 13.3 percent, according to an article posted by the Heilongjiang Soybean Association. 

Brazilian soybean exports to China hit a record of 64.97 million tons, up 25 percent, while US exports to China fell 8 percent to 20.36 million tons.

The robust growth in Brazil's corn and soybean exports to China reflects the country's growing competitiveness in international agricultural trade, especially compared with the US. Brazilian corn exports are expected to reach 55.94 million tons in 2023, compared with 44.7 million tons in 2022, while soybean exports are estimated at 101.1 million tons, up from 77.8 million in 2022, according to projections from Anec, a Brazilian trade group representing grain exporters.

These figures reflect bumper harvests in Brazil this year, and also a trend for the massive Chinese market to turn to Brazil to reduce dependence on the US for corn and soybeans.

Given current circumstances, China's pursuit of diversification of corn and soybean supplies away from the US is totally justified. 

For starters, Brazil's agricultural products have the advantages of low costs, good quality and stable supplies. Also, Brazil has no major areas of trade friction with China. In particular, Brazilian President Luiz Inacio Lula da Silva has been actively seeking closer economic relations with China. 

For instance, in October, China and Brazil completed a commercial deal in their local currencies for the first time, with transactions financed and settled in yuan and converted directly into Brazilian reals, according to the Xinhua News Agency. The transaction followed the signing of a memorandum of understanding in April to promote local currency trade.

China's increased purchases of Brazilian farm products are conducive to promoting economic and trade cooperation.

By comparison, the grain trade between China and the US faces uncertainties and challenges. 

One of the main reasons for tensions in bilateral relations is that the US always sees trade issues with China from a geopolitical perspective and continuously escalates unilateral suppression and sanctions on Chinese companies and Chinese manufacturing, undermining trust and confidence on both sides. 

Against this backdrop, there is every reason for China to be cautious and take some geopolitical factors into account when it comes to grain imports for the purpose of the country's food security. This shift may put more pressure on US agricultural trade, but it is a necessary precaution for China. 

After all, China is one of the largest buyers for agricultural products in the world. With its large population, it is essential for China to choose competitive, safe and stable supply sources to guarantee its food security.