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Crisis in China: How does it affect Brazilian soy?

Posted by Rafael Moro

Image: Pixabay

One of the most important factors influencing soybean prices is China, the world's largest consumer. According to TF Agroeconomic Consulting, the giant Asia should import around 101 million tons of oilseed next season, according to estimates by the USDA (United States Department of Agriculture).

This would represent no less than 63% of all world demand, which are the 160 MT to be exported in the 2021/22 harvest, of which 93 MT will come from Brazil. “This demand is responsible for a good portion of international soybean prices. However, China is living through difficult days in its economy, mainly due to the sharp rise in the prices of all the raw materials it imports, from ore to soy and meat”, point out market analysts.

“Its economy, although robust, is showing signs that it can't handle such an increase. As if that wasn't enough, the country's second-largest developer, Evergrande, has filed for bankruptcy, with $185 billion in debt, which the government will have to help manage. All of this is having repercussions not only on the Chinese economy, but, due to its size and influence, also on other world economies, which, to a greater or lesser degree, depend on China”, they argue.

One of the direct signals about the soy sector came this week: “Chinese soy crushing plants in Tianjin and Jiangsu have been shut down due to tight coal supply and stricter PRC emissions targets. The Louis Dreyfus plant in Tianjin has a capacity of 25kT/day and will remain offline until October at least,” TF points out.

"Nothing too big, nothing too decisive, but it is one more factor that adds to the reduction in demand in Brazil and the US for soy oil for the production of biofuels, which could accentuate the fall in prices in Chicago in the medium and long term deadlines. It's good to be attentive”, recommend the consultants' specialists.

By: Leonardo Gottems | Agrolink

This text was automatically translated from Portuguese.