Brazil's soybean exports could fall up to 24% year on year in 2018-19 if the current US-China trade talks are successful, according to Brazilian agricultural consultancy ARC Mercosul.
A potential breakthrough in talks could prompt China to return to the US for supplies, which in turn would hit the market share of Brazil, the world's biggest soybeans exporter. The South American nation has seen a sharp jump in sales to the world's biggest soybean consumer -- China -- since the start of the trade war.
"An important factor impacting Brazilian soybean exports is the possible resolution of the trade war between the US, the world's top soybeans producer, and China," the Brazilian national crop agency Conab said in its March report.
ARC Director Matheus Pereira told S&P Global Platts: "There are two possible scenarios. Either Brazil will export 74 million mt, down 12% on year, if the US-China trade war ends and China withdraws 25% tariff on US-origin soybeans. Alternatively, Brazil may be able to export only 64 million mt, down 24% on year, if the trade war ends with reversal of tariff barriers on the US-China bilateral trade incentive packages."
"In either case, Brazilian soybean is set to lose its competitive edge to the US post the trade deal between the US and China," he said.
A breakthrough in the US-China trade deal might take some pressure off of the US soybean farmers, who have been hit hard by the recent flooding in the Midwest region, as well as in the Missouri and Mississippi river valleys.
Satellite imagery showed combined losses at grain storage bins impacted by the floods at around 20 million bushels (544,000 mt) of soybeans and corn, Arlan Suderman, analyst at global consultancy firm INTL FCStone, said.
"The US-China trade deal can pump CBOT price by $1.00/bu on soybeans," Matheus added. CBOT May contract is currently trading at $9/bu as of 1:48 am CT.
According to the latest Platts assessments on Tuesday, SOYBEX FOB Santos (May) was trading at $346.88/mt and SOYBEX FOB Paranagua (May) was at $345.41/mt. While SOYBEX FOB New Orleans (May) was trading at $346.49/mt and Soybeans CIF New Orleans (Apr) was at $340.98/mt.
