Luiz Carlos Santos Jr.
Associate Director
SA Commodities

Yes, Brazil and Argentina are poised to gain market share as China moves away from U.S. suppliers, particularly for agricultural products like soybeans, corn, and meat. This shift, fueled by trade wars and tariffs, creates new opportunities for South American nations to boost exports and secure a larger share of the global market.

Escalating tensions between the U.S. and China – the world’s biggest supplier and consumer of farm products, respectively – have created an opening for the South American nations to ramp up exports of everything from meat to grains in a bid to seize global market share.

So far, China’s shift away from U.S. products is shaping up to be a major driver of Brazilian and Argentine exports. In April, the Asian superpower ordered a huge amount of soybeans from Brazil, giving the country a leg up in its farming rivalry with the U.S., and it recently reached a deal to restart poultry shipments from Argentina. 

Increasing shipments to Europe is a possibility, too, with talks for a trade deal between Mercosur – the South American trade bloc – and the European Union gaining momentum.

Argentine sorghum producers may also benefit from higher prices since there are not many alternative suppliers of the grain used in animal feed. China is the world’s top buyer, and the U.S. is the top supplier. 

Should the trade restrictions continue into the fall, when the U.S. kicks off its harvest of soybeans and corn, South American grain producers will have another opportunity to offer alternative supplies. 

We shall keep in mind that if this mess lasts until the fourth quarter, which is when the U.S. harvests and China and Europe switch their soy and corn purchases there, the U.S. isn’t going to be able to export and those countries will keep buying in South America instead.

Still, price volatility in agricultural markets remains a risk to all exporters. While physical premiums for soybeans in Brazil and Argentina initially climbed on the tariff announcements, for example, a global recession would dampen demand and pressure futures prices lower.

NEGATIVE EFFECTS OF TRUMP’S TARIFFS

There is a consensus among experts, however, that the impacts of the “tariff hike” are unlikely to be so simple or immediate. No one in the world today believes that Trump’s tariffs are the last chapter in the history of trade negotiations on the planet; on the contrary, they will trigger reactions from several countries.

One of the indirect effects on agriculture is likely to occur in agricultural machinery. Brazil imports a lot of equipment used in the field, from China and the United States. The American agricultural machinery industry imports components from other countries, which will also be subject to increased tariffs, which means that the price of this equipment imported by Brazil could also rise.

This increase in the cost of machinery for production in Brazilian agriculture is also something that increases our costs and may have an impact on our production. There is a sequence of interactions that needs to be examined carefully and, on a case-by-case basis. In addition to suppliers and target markets themselves, the trade war environment should promote a change in the way markets connect.

Connections are no longer made on an open platform governed by price, but rather through agreements or strategic partnerships. This is what many call a new era of bilateral or regional agreements. In this environment, countries can choose to reestablish partnerships that close markets, engaging in cross-negotiations. This affects an area in which Brazil is ahead of the rest of the world, which is in price and quality.

WHAT ABOUT PORTS AND INFRASTRUCTURE?

The tariffs imposed by the US on China may lead companies to reconsider their supply chains. Brazil, as a major agricultural producer and supplier of raw materials, may benefit from an increase in demand for its products. In addition, companies seeking to diversify their supply sources may look to Brazil as a viable alternative.

Logistics Adjustments: Brazil already has a developing logistics infrastructure, and increased demand may accelerate investments in ports, railways and highways. - The government and the private sector can collaborate to modernize and expand existing infrastructure, improving efficiency and reducing costs.

Innovation and Technology: The adoption of modern technologies and innovations in logistics, such as automation and digitalization, can help Brazil adapt quickly to changing market demands. Startups and technology companies in Brazil are increasingly focused on logistics solutions, which can boost the growth of the sector.

Trade Openness and International Agreements: Brazil can seek new partnerships and trade agreements with other countries, which can help expand its markets and increase competitiveness. Participation in economic blocs and bilateral agreements can facilitate access to new markets, helping to mitigate the impacts of tariffs.

By presenting these points, we can demonstrate that Brazil is in a favorable position to continue its economic growth and adapt to changing global trade dynamics.

BRAZIL SET FOR RECORD GRAIN HARVEST

With the harvest of first-crop crops at an advanced stage, the National Supply Company (Conab) has confirmed the prospect of a record grain harvest in the 2024/25 season.

Among the cultivated products, soybeans should register the largest volume ever harvested in the country. In this harvest, Conab forecasts a production of 167.9 million tons, a result 20.1 million tons higher than the last harvest. The Centre-West, the main grain-producing region, is expected to register a new record in average crop productivity with 3,808 kilos per hectare, surpassing the 2022/23 cycle. In Mato Grosso, the harvest has already reached 99.5% of the planted area, with average productivity reaching 3,897 kilos per hectare, the highest ever recorded in the state of Mato Grosso. A similar scenario is seen in Goiás, where harvesting work has already reached 97% of the area with a productivity of 4,122 kg/ha.

With the soybean harvest advanced, the planting of the second corn crop is close to being completed. Total cereal production, considering the three crop cycles, is estimated at 124.7 million tonnes in 2024/25, an increase of 9 million tonnes compared to the previous cycle. In the second grain harvest alone, a harvest of 97.9 million tons is expected, the result of a larger planted area, estimated at 16.9 million hectares, combined with a 5.5% recovery in average productivity forecast at 5,794 kilos per hectare.

As far as the corn concerns, at the end of March, the harvest of the first corn crop reached 53.3% of the planted area, well above the average of the last five harvests, which was 41.1%. The reduction in rainfall in March favoured this performance. The yields achieved in all states exceeded the initial estimates and the results of the last harvest. 

In all growing regions, the weather conditions were favorable, with rainfall well distributed during the development of the cereal. Special mention should be made of the states of the Southern Region, which obtained average yields of 8,823 kg/ha, 27.8% higher than that obtained in the last harvest. 

For the 2024/25 harvest, planting took place on 3,768.7 thousand hectares, 5.1% lower than that recorded in the last harvest, but with a production of 24,465.4 thousand tons, 6.5% higher than the last cycle.

THE ROAD FORWARD

Ultimately, we all know that there is still a long way to go, and a lot of water is yet to flow under the bridge. The fact is that with all the events and decisions made by the American government, countries in South America such as Brazil and Argentina will benefit not only from the increased demand for grains such as soybeans and corn but also from many other commodities and products traded globally.

Obviously, logistics, as mentioned previously, will be impacted in some way and a lot of effort will need to be made so that we can keep up with the increase in demand that we estimate will lie ahead. Perhaps this will serve as a lever for development in the ports in the north of the country, which already have a significant share of Brazilian exports, especially soybeans and corn.

I believe that this tariff war will still have a profound impact on the global economy, which, even though it benefits some countries, could be a risk for the whole.

About the Author

SA Commodities was founded by Luiz Carlos dos Santos Jr. in 1995. He began his career in the sugar industry in the early 1990s, offering commercial support, strategic consultancy, and project development for shipping agencies handling sugar and grain vessels across various Brazilian ports. In 2007, he took on the role of Head of Operations at Kingsman Brazil, where he brokered approximately 1.6 million tons of physical sugar—both raws and whites.

In 2009, Luiz Carlos partnered with the Unimar Group, assuming responsibility for the commercial division focused on soft commodities. Over the years, he has been invited to speak at leading international conferences, including Global Grain Geneva, Global Grain Cairo, Argus Paris Grain Conference, London Commodity Trading Week, and the Dubai Sugar Conference, among others.

The merger of SA Commodities with Grupo Unimar at the end of 2023 marked a significant milestone in the sector. This strategic alliance brings together SA Commodities’ trading expertise and Grupo Unimar’s robust logistics capabilities. United, the companies aim to expand their market presence and deliver added value across trading, shipping, and logistics services.