South American countries are standing out as early winners in the global trade war that is destabilizing agricultural markets.
The growing tensions between the US and China-the world’s largest supplier and consumer of agricultural products, respectively-have created an opening for the South American nations to increase exports of everything from meat to grain in an attempt to gain participation in the global market.
The newest opportunity seems to be the meat. US President Donald Trump’s rates about eight of the ten largest beef buyers in America have already redesigned commercial flows, increasing Brazilian beef exports to “halal” markets[ liberados para o consumo de muçulmanos]including Algeria and Türkiye.
Japan, the second largest US beef client, is now in advanced negotiations to start buying cheaper meat in Brazil.
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And any economic deceleration caused by the trade war will cause other international beef buyers to change their purchases to lower cost suppliers, especially Brazil, according to Datagro market analyst Guilherme Jank.
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So far, China’s change in relation to US products is proving to be a large engine for Brazilian and Argentine exports. Asian superpower commissioned in April a large amount of soy in Brazil, giving the country an advantage in its agricultural rivalry with the US, and recently signed an agreement to restart Argentina bird shipments.
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The increase in shipments to Europe is also a possibility, with negotiations for a trade agreement between Mercosur-the South American commercial bloc-and the European Union gaining momentum, according to Marcos Jank, senior teacher of global agribusiness at Insper.
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Argentine sorghum producers can also benefit from higher prices, as there are not many alternative grain suppliers used in animal feed.
China is the largest buyer in the world, and the US is the main supplier. If commercial restrictions continue to autumn, when the US starts the soybean and corn harvest, South American grain producers will have another opportunity to offer alternative supplies.
“If this confusion lasts until the fourth quarter, which is when the US harves and China and Europe change their soybean and corn purchases there, the US will not be able to export and these countries will continue to buy in South America,” said Ivo Sarjanovic, a former commodity business and professor at Torcuato di Tella University in Buenos Aires.
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Still, price volatility in agricultural markets remains a risk to all exporters. Although physical soybean awards in Brazil and Argentina initially have risen with tariff ads, for example, a global recession would probably decrease demand and press down future prices. But even in this case, Jank said from Datagro, “It is more likely that an economy that matters beef consume cheap meat instead of face meat.”
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