U.S. Ethanol Partly Drives Brazil's Soy Exports to China

In a rare U.S. newspaper article that reveals the complexity of global entanglements over something so simple as food, The New York Times notes Brazil’s status as the largest soybean exporter in the world and looks at China’s involvement. Some history:

Once, the biggest bilateral food trade flowed between the United States, the world’s largest food exporter, and Japan. But countries with vast arable land available for expansion, particularly Brazil, are now racing to meet demand in China, whose population of 1.3 billion is 10 times that of Japan’s.

Farmers in the United States have started planting far more corn for ethanol at the expense of other crops, including soybeans. But after the United States grain embargo by President Richard M. Nixon in the early 1970s helped spawn Brazil’s soybean industry, American farmers are not giving up their leading role in the grain trade easily.

They’re not giving up, but even the United States isn’t big enough to feed China. Perhaps the most interesting angle of China’s involvements in countries whose exports fuel China’s population is the incentive for Chinese business and government to improve infrastructure in supplier economies.

The Chinese want to connect directly with Brazilian farmers, bypassing the multinational grain merchants. While they have yet to make a major purchase of cropland in Brazil, they are looking to invest in improved facilities and upgrade the antiquated rail system.

This presents a huge opportunity to Brazil, but it might not help as much as it could if not managed correctly. Developing a rail system for more efficient soy exports might not build the kind of rail network Brazil would want for general development. The challenge for Brazilian authorities is to make sure what Chinese groups build helps Brazil.

UPDATE: How could I miss the companion article about the infrastructure! (Although I feel like I’ve read something almost identical in the last year.) The short of it is that most of these soybeans are moved by truck on the Brazilian end—not exactly a model of efficiency. And China’s involvement has remained nominal and ambiguous:

“A lot was said a few years ago about big partnerships between C.V.R.D. and China to boost the country’s railroad infrastructure,” a company spokesman, Fernando Thompson, said. “None of those plans have gone forward, and we have no current discussions under way with Chinese companies” on expansion.

C.V.R.D. may help build a new north-south railway link, Mr. Bartolomeu said — but only if it “makes economic sense.” For now, amid sharp competition for space on cargo trains, the company has reduced the soybean products it shipped by rail last year by 11 percent, to 5.8 million tons. The level was still more than double the soy that the company shipped in 2001.

I still think it would be wise for the Brazilian government to try to use this opportunity and make it “make economic sense” for them to get better infrastructure.





Leave a Reply

Your email address will not be published. Required fields are marked *