PAULO, (Reuters) – Global commodities trader Luis Dreyfus Co is prepared for another unusually strong second half for Brazil’s soy exports to Asia as the U.S.-China trade war drags on, with Argentina poised to profit as well this year, a senior executive told Reuters.
Dreyfus benefited the most from last year’s surprise second-half boom in soybean exports to China resulting from U.S. trade tensions, opening an unusual window for South American soy later in the year, when the timing of harvests often favors U.S. soy.
“If the trade war continues, we should have a repetition of last year. Brazil should export more, a larger volume than we expected and projected,” Murilo Parada, Dreyfus Brazil chief executive, said in a Friday interview. The difference now is that Argentina, which suffered a poor soy harvest last year, is in better shape to profit from the U.S. woes, he said.
According to a Reuters compilation of soy trade data, Dreyfus boosted its soy exports out of Brazil by 28 percent in 2018, the most of any trading firm.
Parada said the outlook remains unpredictable but stressed that recent investments in new Brazilian export routes have prepared Dreyfus to react quickly, as it did last year, to boost local volumes.
Dreyfus has invested nearly 1 billion reais ($250 million) in storage and logistics in northern Brazil in recent years. The firm now has 64 barges and a transshipment station on the Tapajós river, along with more capacity at the Itaqui port in Maranhão, where ships embark for China from a terminal operated jointly with traders AMaggi and ZEN-NOH.
Parada, a Brazilian agribusiness engineer who has led Dreyfus operations in the country since 2017 after a posting in China, said politics have made the U.S.-China trade dynamic highly unpredictable.
Regardless, he said, Dreyfus has a positive long-term view for Brazil, which already hosts a third of the company’s assets, based on the availability of land to ramp up food production.
“Demand for food will continue to increase in the world. Most of it will come from Asia, but additional production will take place fundamentally in Brazil,” he said. The company’s global footprint, particularly in Brazil and China, has been designed to handle that growing trade.
Asked about concerns of agriculture expansion spurring deforestation in Brazil, Parada said there is already more than enough land to expand farming without cutting down trees.
Dreyfus works with 25,000 farmers in Brazil and has a policy of ending purchases from those who break environmental laws.