brazil soybean farmers - The Trade War Convert Brazilian Sugarcane Farmers to Plant Soybean

US-China trade war is changing Brazilian agricultural industry, initiating more farmers to align their crops with Chinese demand. According to Brazilian government data, the nation’s soybean acreage has increased by 2 million hectares in two years, while the sugarcane planting area has decreased by 400,000 hectares.

Brazilian farmer Gustavo Lopes has a sugarcane field in Sao Paulo state, covering 1600 hectares. In consideration of the global trends, including US-China trade raising tension and the oversupply of the sugar market, Gustavo chose to change his last sugarcane field to soybean-planting, and gave up several decades’ sugarcane supply contract that had been signed with a local sugar factory.

The crop swap will inevitably threaten the survival of sugar factories that rely on these farmers to supply sugarcane. In the sugarcane producing areas of central and southern Brazil, about 60 sugar factories have closed in the past five years, and more than 270 factories that still open have become difficult to fight for sugarcane supply. Last year, farmer Antonio de Morais Ribeiro Neto had replanted 400 hectares of sugarcane fields with soybeans after shut down the sugarcane processing factory that he supplied.

In the first half of this year, Brazil’s soybean exports to China increased by 6% compared to last year, reaching nearly 36 million tonnes. In July, soybean imports increased by 46% compared to the same period last year, about 10.2 million tonnes. China’s growing demand for meat has also contributed to the increased soybean import for animal feed. China paid $20.3 billion last year buying 53.8 million tonnes of soybeans from Brazil, nearly half of its production, up from 22.8 million tons in 2012. China’s new tariff of 25% on U.S. soybeans is expected to push Brazil’s soybean exports to hit an all-time record this year.

With the reduction of sugar consumption in developed countries, China’s sugar import tariffs have also brought pressure to the global sugar market. Brazil’s sugarcane cultivation is being affected by the decline in sugar prices, and China’s demand has boosted Brazilian soybean prices. Under the dual role, Brazilian farmers believe that planting soybeans seem more promising than planting sugarcane. In addition, sugarcane fields generally can be replanted after five or six years, and many sugar factories are using this period to produce soybeans.

Also Read: Brazilian Soybeans Premium to U.S. Soybeans Hits a Four-Year Top

In the face of the growing fever of soybeans, some are cautious about relying on only one crop and a large importing country. Gustavo has no regret replanting soybeans. His sugarcane field earned a net profit of 480 reais ($120) per hectare last year, compared with a net profit from soybean field of 2,600 reais ($655) per hectare.

 

 

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