Trump Trade War Positively Impacts Brazil’s Agribusiness Sector

Brazil’s agribusiness, particularly SLC Agricola, is benefiting from the U.S.-China trade war, with increased demand for Brazilian soybeans and cotton. CEO Aurelio Pavinato estimates significant U.S. losses due to China’s tariffs on American agricultural goods. He expresses skepticism about future U.S.-China agreements impacting Brazil’s advantageous position.

The trade conflict initiated by U.S. President Donald Trump is proving advantageous for Brazil’s agribusiness sector, particularly as articulated by Aurelio Pavinato, CEO of SLC Agricola. During a recent analyst call discussing the company’s fourth-quarter performance, Pavinato highlighted that Brazilian agriculture benefits significantly, positioning Brazil as a reliable food supplier amid global demand fluctuations.

Pavinato remarked that the favorable dynamics for Brazil stem from robust demand, especially from China, the largest importer of soybeans. He pointed out that China’s dependence on U.S. soy has notably decreased since the trade tensions of 2018-2019, allowing Brazil to capture a larger share of the market.

In response to new tariffs implemented by the U.S., China recently imposed increased levies on American agricultural products, including meat and soybeans, further solidifying Brazil’s position. Pavinato anticipates that Brazil will export approximately 80 million metric tons of soybeans to China, in contrast to 21 million tons expected from the U.S. this year.

The trade war has already resulted in elevated prices for Brazilian soybeans compared to Chicago benchmarks, with Pavinato suggesting a potential rise of 10%, mirroring the tariff rate imposed by China on U.S. soy. Additionally, he noted that Brazil is poised to fulfill all of China’s cotton import needs as its reliance on U.S. corn diminishes.

Looking ahead, Pavinato raised concerns regarding the prospects of a new agreement between China and the U.S. over agricultural goods, noting that any similar deal as before could detrimentally impact Brazil. He expressed skepticism about such a deal materializing, sharing, “But we don’t believe it will happen.” He emphasized that while negotiations may occur, agricultural issues are unlikely to be central, predicting that future trade tensions would be more geopolitical in nature than commercial.

In conclusion, the trade war initiated by the Trump administration is materially benefitting Brazil’s agribusiness sector, with strong Chinese demand for Brazilian soybeans and cotton. The decline of China’s reliance on American agricultural products presents an opportunity for Brazil to solidify its position in the global market. Future negotiations between China and the U.S. are viewed with caution, as potential agreements could disrupt Brazil’s market advantages.

Original Source: money.usnews.com