Analysis: For agro, internal policy change in China worries more than GDP drop

Agribusiness exports accounted for 48% of the entire Brazilian trade balance in 2022, a percentage higher than the 43% in 2021.

China has been the main driver of the evolution of the national agricultural balance, being responsible for a third of the revenues that Brazil obtained last year.

Chinese participation in 2022 was lower than that of 2021, but this drop had several reasons, ranging from the zero Covid policy to the lower availability of soy in Brazil for export.

Even with the pandemic and a lower evolution of the Gross Domestic Product (3% in 2022), the Chinese appetite for Brazilian products has not diminished.

The Asian country has been maintaining imports of soy, meat, cellulose, cotton and is starting to import corn from Brazil.

Daniele Siqueira, an analyst at AgRural, says that the pace of Chinese purchases has a lot to do with the dynamics of the market in the Asian country.

Commodity prices are high, and China is changing some purchasing policies. Any drop in soy imports was due to issues involving the pig farming sector.

With the occurrence of African swine fever, and a consequent dismantling of Chinese domestic production for a period, there was a reduction in soybean meal consumption.

For the analyst, however, in the period of the 2021/22 harvest (from October 2021 to September 2022), the zero Covid policy, changes in consumption habits and the weaker GDP influenced, albeit on a small scale. There has indeed been a reduction in pork consumption in China, she says.

The scenario for 2022/23, however, is different from that of 2021/22. There are expectations of improvement in Chinese soybean imports, but without a significant increase.

Regardless of the evolution of the GDP, the analyst warns, however, of changes taking place in the Chinese market. Soy is expensive, the Chinese have learned to use less bran in their feed, and oilseed imports are no longer growing as they used to be.

For her, “China is an extremely important customer for soybeans from Brazil, and will continue to be so, but we can no longer expect that its demand will absorb all the surplus production that we will have in years of increased area and full harvest”.

Soybean area and production increase year by year in Brazil, and the country needs to diversify, seeking new markets and increasing crushing for own consumption or export of bran and oil, she adds.

As for corn, China only started to buy the cereal from Brazil with greater intensity from December onwards. These purchases are expected to continue this year because Ukraine, a supplier to the Asian country and affected by the war, has little supply.

The Chinese also discovered Brazilian meat and became the main market for national proteins. Pork and chicken meat should not have great evolutions because the Chinese are recomposing these two activities, after the African swine fever and the avian flu.

The appetite for Brazilian beef should continue, due to the competitiveness of Brazilian protein and the Chinese difficulty in increasing domestic production.

The alert for this sector, however, is due to high interest rates and the retraction of the world economy. They can affect employment and income in China, which would make it difficult for more consumers to reach the middle class.

Even products not related to food, such as cellulose, had an increase of 19% in the volume exported in 2022. Sales of cotton, on the other hand, retreated 10% in 2022, according to data from Secex (Secretary of Foreign Trade).