Brazil’s new president sure to shake up agricultural giant

Brazil’s farmers are posting a record pace of soybean seeding this season even as they paused twice to vote in the country’s national election.

News accounts say farmers generally favoured the candidate who won the race in a second round run-off vote, the conservative and controversial Jair Bolsonaro.

At the end of October, farmers had 46 percent of the expected soybean crop planted compared to the five-year average for that time of year of 28 percent.

Soil moisture is generally good.

Even though they have had a windfall in the market thanks to the trade war between the United States and China, farmers there are expected to increase their soybean seeded area by about only three percent, to 89.2 million acres from 86.7 million last year.

With average weather, they are expected to reap a crop of between 119 and 120.5 million tonnes according to Brazilian and U.S. forecasters. That would be similar to the last harvest.

For the past several months, Brazil has had the lucrative Chinese market almost to itself because China has a 25 percent tariff on American soybeans as part of its response to U.S. President Donald Trump’s tariffs on Chinese steel and other products.

The U.S. is now talking of imposing more tariffs on Chinese products.

The Brazilian crop will have a big impact on world oilseed prices, including Canadian canola.

In 2017-18, Brazil and the U.S. produced almost the same size crop at 120 million tonnes.

Earlier this year, analysts expected U.S. production for 2018-19 would fall to around 116.5 million tonnes, allowing Brazil to take the lead for the first time ever.

However, near-ideal weather improved U.S. yields and the current official forecast has been raised to 127.6 million tonnes, meaning the U.S. retains the crown, but year-end stocks will rise. That is weighing down oilseed prices and raising speculation that U.S. farmers will cut soybean acres next spring.

With a weak El Nino in the forecast, Brazil should have adequate moisture for good yields and because of the quick pace of seeding, the harvest could come early.

That would be good news for China as it tries to avoid American soybeans.

Normally, the U.S. has the Chinese market mostly to itself in the November to January period while Brazil is sold out of product until its harvest gets fully underway in February and March.

But this year, China appears resolved to not take U.S. soybeans even though they are now priced favourably despite the 25 percent tariff. Two recent cargoes destined for China were diverted to other Asian countries and Beijing lowered guidelines for protein in livestock feed hoping to lessen the demand for oilseed meal.

Still, the lack of American soy will be sharply felt until South America resumes shipping, so an early Brazilian harvest would be welcome news to Chinese livestock feeders.

China might be more reliant than ever on Brazil for soybeans and other raw materials, but surprisingly president-elect Bolsonaro is not cozying up to Beijing.

Indeed he complains about China’s investments in Brazil.

He is fine with selling Brazilian goods to the Asian giant, but does not want them buying land or key industries in his country.

And just to poke China’s leaders in the ribs, Bolsonaro recently paid a friendly visit to Taiwan, which Beijing views as a breakaway province.

Critics think he is crazy to push China away when Brazil needs billions in infrastructure investment to take full advantage of its abundance of agricultural and mineral wealth.

Chinese companies have already invested hundreds of billions of dollars in Brazilian projects, such as a new port in the country’s northeast to ship soybeans.

Also, there had been talk of China investing in railway infrastructure.

Many Brazilians appeared to have voted for Bolsonaro because they were fed up with the scandals and corruption of the previous government. You might remember that Brazil’s meat industry was rocked by news of widespread bribing of government inspectors to certify meat that was rotten or tainted.

There were also huge cost overruns on the Olympics, massive corruption at the state-owned oil company involving high ranking politicians including former president Ignacio Lula da Silva and a multi-year recession.

Some have likened Bolsonaro to U.S. President Trump for his brash behaviour, nationalism, support of right-wing causes and promises to cut regulations. He proposed merging the departments of environment and agriculture but is now wavering on the pledge. However, he is committed to speeding environmental reviews and reducing bureaucracy for farmers and others.

This raises worries that he will open up for development protected areas of the Amazon and Cerrado grasslands creating great ecological damage.

Likely as with Trump, the controversies will come fast and furious creating a lot of uncertainty for one of the world’s agricultural superpowers.

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