China’s ties with Brazil extend beyond soybean production

China is expected to resume soybean purchases from the world’s largest economy as part of a trade agreement hopefully reached at a meeting in South Korea on Thursday. Turning a key import into a trade war lever is a victory for China’s planning model, Reuters reports.

China stopped purchasing American products after Brazilian President Luiz Inacio Lula da Silva visited China in May. Trump called the refusal to buy US legumes an “economically hostile act” and the day before, he had announced plans to stop buying Chinese vegetable oil.

Experts note that this is unlikely to be considered equivalent retaliation. The US is China’s main market for waste vegetable oil, a popular feedstock for renewable fuel production. Last year, its exports totaled $1.1 billion, a fraction of the $12.6 billion China spent on soybean imports.

While American farmers struggle to find an alternative market, the People’s Republic of China has long been determined to turn Brazil into a soybean superpower. Beijing has provided satellite monitoring of deforestation, and Chinese fertilizer exports to Latin America’s largest economy have grown to $18 billion in 2023, nearly tripling their 2018 value. Chinese agricultural conglomerate COFCO has invested over $2.3 billion in Brazil since entering the market in 2014, including in a port in Santos capable of handling up to 14 million tons of grain per year.

Crops from Latin America could become even more competitive if Beijing is allowed to build a transcontinental railway. The project, linking Brazil’s Atlantic ports with Peru’s Pacific coast, could reroute traffic through the Panama Canal. Brazil is also one of the most active countries in the world cooperating with China’s central bank for yuan-denominated commodity transactions.

Chinese investment is also expanding into other sectors. This month, Lula de Silva opened BYD, a massive grain processing plant in Bahia, creating 20,000 jobs. The site was previously occupied by American automaker Ford Motor.

Over-reliance on Brazil could also be risky for China due to market monopolization, analysts note. However, for now, China will be able to continue importing the soybeans it needs, regardless of the duration of any new trade agreement with the US.

Tags: China, Brazil, soybean, USA