Brazil has much to gain from the end of the truce between the US and China, but there are pitfalls

In the trade dispute between the United States and China, the winner so far has been the Brazilian soybean producer. In response to US President Donald Trump's imposition of tariffs on Chinese products, the Asian country has completely suspended purchases of the oilseed from the US, Brazil's main competitor in the sector.

With the latest escalation in tensions between the world's two largest economies – with a 100% US tax on products originating from Xi Jinping's country – the expectation, at the moment, is for new and successive export records for Brazilian soybeans in the coming months.

In September, sales of the commodity to China have already soared 57.1% compared to the same month last year.

The challenge for the sector from now on is to maintain this level of foreign sales amidst a geopolitically unstable context, dealing with the risks of crop failures and even shortages in the domestic market and consequent price increases.

Tariff on US made Brazilian soybeans cheaper for Chinese importers

The situation began to take shape in February, when Trump announced an additional 10% tariff on Chinese goods as a way to protect the domestic economy. Beijing's response came in the form of 10% to 15% tariffs on various American products, as well as restrictions on the export of rare earth minerals, among other measures.

From then on, there was an unprecedented escalation of reciprocal tariff barriers by both countries, until, on May 12, the United States and China established a truce for a period of 90 days.

As a result, tariffs imposed by the US government on Chinese imports were temporarily reduced from 145% to 30%. Meanwhile, the tariff imposed by China on American goods was reduced from 125% to 10%.

American soybeans, however, being an economically strategic product, were subject to a 20% tariff, which made their price less competitive in the Chinese market and opened space for increased purchases of Brazilian soybeans.

China is the world's largest soybean importer; Brazil and the US are the largest exporters

China is the world's largest consumer market and the leading importer of soybeans, accounting for 61.1% of all purchases of the oilseed on the global market. This volume is explained by the country's heavy use of the input in animal feed production for pig and poultry farming. China's domestic production meets only 15% of its demand, relying on imported grains for 85%.

Last year, according to the General Administration of Customs of China, the country imported 105.03 million tons of the commodity , of which 71.1% came from Brazil, and 22% from the United States.

The third and fourth largest exporters were Argentina and Uruguay, although with a significantly lower volume, of 4.1 million (3.9%) and 2.02 million (1.9%) tons, respectively.

Total U.S. soybean exports last year totaled 52.2 million tons, according to data from the U.S. Department of Commerce. China was by far the top destination, purchasing 26.8 million tons (51.3%), which gives an idea of ​​the impact of the trade suspension on U.S. soybean producers.

Not only that: sales to the Asian country represented 22.5% of all soybean production in the United States in 2024 (118.9 million tons), according to figures from the United States Department of Agriculture (USDA).

China has not purchased a single soybean from the US since May.

Although they compete in the Chinese market, Brazil and the United States traditionally supply the commodity at different times of the year due to the difference in planting and harvesting periods.

China concentrates its soybean imports from Brazil between February and September, while the main sales window for American soybeans usually begins then, with the start of the fall harvest in the Northern Hemisphere. US sales generally conclude in February—or, in years when the Brazilian harvest is delayed, in early March.

In 2025, however, after purchases made at the beginning of the year, still related to the previous harvest, the Chinese market literally didn't import a single grain from the US. It replaced American soybeans with imports from Brazil and, to a lesser extent, Argentina. The last US purchase was in May.

Data from the Ministry of Development, Industry, Commerce and Services (MDIC) shows that, as of July, China has already begun to increase orders for Brazilian soybeans to reinforce its stocks.

In that month, oilseed cargoes departing from Brazil to Chinese ports totaled 9.6 million tons, an increase of 7.4% compared to the same month in 2024.

The following month, shipments totaled 7.9 million tons, 33.9% more than in August of last year. In September, shipments totaled 6.8 million tons, 57.1% higher than the volume transacted a year earlier.

To give you an idea of ​​the weight of Chinese demand, of all soybeans exported by Brazil in September, 92.3% went to China. In the same month of 2024, the Asian country received 70.6% of Brazilian soybean shipments.

"They say no one wins a trade war. Certainly, there are few bigger losers than soybean farmers in the United States," states the British magazine The Economist , in an article published last week.

"The dispute is ruining farmers in Illinois [...] It's also raising costs for processors in China's Shandong province, which turn grain into animal feed and cooking oil," the article continues. "But so far there has been one big winner: Brazil's soybean farmers," the magazine declares.

Increased exports to China come with risks

The increase in Brazilian soybean trade with China, however, is not without its side effects. Reliance on a single market exposes the sector to the risk of frustration in the event of, for example, a trade agreement between Washington and Beijing.

"It is necessary to evaluate Brazil's perspective in relation to China, its main client, and also the Chinese perspective, which does not necessarily feel comfortable with excessive dependence on a single supplier," highlighted the coordinator of the Asia nucleus of the Brazilian Center for International Relations (Cebri), Larissa Wachholz, at the VII Seminar Challenges of Brazilian Leadership in the World Soybean Market, held recently in Londrina (PR).

"We need to be aware of changes in the geopolitical landscape and also in China's domestic politics to position ourselves strategically," he assessed.

Director of the Department of Inspection of Products of Plant Origin at the Ministry of Agriculture and Livestock (Mapa), Hugo Caruso, added that Brazil has been receiving notifications from China related to pests and even reports of soybeans treated with fungicides.

"This year, five companies were suspended from exporting soybeans, but we were able to reverse the situation by committing to resolving the issue. Therefore, we need to ensure that the entire production chain is aware of its responsibilities to avoid causing complications in our exports," he warned.

Yedda Monteiro, an intelligence and strategy analyst at Biond Agro, further explains that phenomena such as El Niño and La Niña can be decisive for the performance of the 2025/26 harvest.

Last week, the U.S. Climate Prediction Center reported that the spread of below-average sea surface temperatures in the central and eastern equatorial Pacific in September created conditions for the formation of La Niña between December of this year and February of next year.

Although milder effects are expected than those observed in previous years, the phenomenon increases the risk of droughts in Rio Grande do Sul and Santa Catarina, which could partially compromise crop supply.

"Brazil's productivity depends on the regularity of rainfall during critical phases such as planting, flowering, and grain filling. This variable remains the greatest risk and the determining factor for the performance of the 2025/26 harvest," says the analyst.

Cost pressures, especially on fertilizers, pesticides, and freight, have also reduced the pace of expansion of cultivated areas, in addition to investment by producers in higher-value seeds and maintenance fertilization, which can limit productivity gains.

Added to these factors is the increasingly insufficient storage capacity for the country's growing production.

"What concerns us is that every year the production percentage grows more than the warehouse construction. And right now, with high interest rates and fewer resources available in the Harvest Plan, the scenario becomes even more challenging," says Lucas Costa Beber, president of the Mato Grosso Soybean and Corn Producers Association (Aprosoja-MT).

“The rising cost of equipment and storage facilities, combined with high inflation, has prevented most producers from investing,” he says.

For Yedda, sustaining the level of soybean exports to China in the coming years will require addressing climate, environmental, and market risks, as well as accelerating the pace of infrastructure investments.

"Brazil has consolidated its global leadership, but challenges remain, especially in the face of climate change and cost pressures," he says.

Record exports affect domestic soybean stocks for crushing in Brazil

Marcelo Teixeira, a market specialist at JPA Agro, emphasizes that the shift in the international context also affects the domestic market. "The trade shock expands Brazil's short-term advantage, but it also requires increased attention," he says.

"We have already recorded exports above the average of the last five years, but this accelerated increase puts pressure on domestic inventories and could increase the price of raw materials for local industry, which already operates with very tight margins," he says.

The more raw soybeans Brazil exports, he explains, the less availability of the grain for crushing, which generates bran and oil, essential inputs for domestic supply and the protein industry.

"We're already seeing some crushers charging bran prices that are decoupled from those of Chicago. This means that, even with the American stock market falling, the price of bran in Brazil remains higher, reflecting the scarcity of raw materials," observes Teixeira.

According to a survey by the Center for Advanced Studies in Applied Economics (Cepea), at the University of São Paulo (USP), crushing industries in the country are quite active in purchasing soybeans, but many are already indicating difficulties in acquiring new lots on the spot market.

Brazil gained dominance of the Chinese soybean market during Trump's first term

This is not the first time that a trade dispute between the United States and China has benefited Brazilian soybean production.

Until 2012, the US had always met the majority of the Asian giant's demand for soybeans. The following year, Brazil surpassed American exports, but sales from the two Western countries remained close until 2016, when Brazil's shipments to China accounted for 45.7% of Chinese purchases, while the US accounted for 40.4%.

In 2017, Trump took office for his first term as US president, advocating tariffs on foreign products as a form of retaliation against countries for unfair practices toward the US. That year, Brazil's share of China's soybean imports rose to 53.3%, while the US share fell to 34.4%.

The major turning point came in 2018, when the first round of tariffs on Chinese goods was effectively implemented. Beijing retaliated by imposing tariffs on American products, and one of the main targets was agricultural commodities, particularly soybeans, the main American agricultural export to China.

With the new tariffs on US soybeans, Chinese importers began seeking alternative suppliers, and Brazil benefited, selling record volumes to the Asian dictatorship. That year, Brazil's share of the Chinese soybean market reached 75.1%, leaving the US with 18.9%.

In January 2020, the United States and China signed a trade agreement, called "Phase One," through which Beijing committed to purchasing additional volumes of American products, including a quota of $40 billion annually in soybeans for two years, totaling $80 billion.

Given the more competitive prices and quality of Brazilian products, however, Chinese importers failed to fully meet these targets. Between 2020 and 2022, China purchased approximately 73% of the target agreed upon with the United States.

Meanwhile, Brazil remained the leader in soybean exports. In 2024, the Asian country imported 105 million tons of soybeans, of which 71.1% came from Brazil and 21.1% from the US.

US soybean farmers frustrated by Trump's trade policy against China

While Trump repeatedly pressures China to buy American soybeans in his speech, in practice his actions have disappointed the country's soybean producers.

In March, when the US president launched the tariff war by imposing an additional 10% tariff on Chinese products, the American Soybean Association (ASA) said it had maintained “consistently for years” its position of not supporting the use of tariffs as a tactic. of negotiation .

"We know that foreign soybean producers in Brazil and other countries are expecting bumper harvests this year and are prepared to meet any demand arising from a new US-China trade war," said Caleb Ragland, president of the association, at the time.

In August, Trump publicly called on China to " quickly quadruple " its soybean purchases from Americans. "Our great farmers produce the most robust soybeans. I expect China to quickly quadruple its soybean orders," the president wrote.

He added that "expedited service will be provided" given the increased demand for the product. "Thank you, President Xi [Jinping]," he concluded.

The request, however, had no effect. Days later, ASA sent a letter to the White House asking Trump to prioritize soybeans in US-China trade negotiations.

The entity also released a technical note describing the long-term financial consequences of the loss of market share in China.

At the end of September, the association publicly criticized the US government's announcement of financial aid to Argentina.

"US soybean prices are falling, harvest is underway, and farmers are reading headlines not about securing a trade deal with China, but about the US government providing $20 billion in economic support to Argentina while the country cuts its soybean export taxes to sell 20 shipments of Argentine soybeans to China in just two days," Ragland said.

While US soybean farmers are suffering from a complete suspension of sales to the Asian nation, the Argentine government suspended the so-called retenciones (export taxes) on soybeans, soybean meal and oil, corn and wheat, which immediately attracted Chinese buyers and further reduced demand for American products.

The measure, valid until October 31st, negatively impacted the price of American soybeans on the Chicago Board of Trade. Consulting firm Hedgepoint Global Markets states that soybean exports from Javier Milei's country are expected to undergo upward adjustments in upcoming USDA reports, potentially exceeding 10 million tons this year.

With 25% retentions on soybeans, Argentina shipped 4.1 million tons of the commodity abroad in 2024, according to the country's National Institute of Statistics and Census.

Trump promises to help soybean farmers, but aid is expected to arrive only in 2026.

Faced with this devastating situation, Trump announced last week that he would provide financial aid to farmers, which, according to American media outlets, should range from US$10 billion to US$14 billion.

"Our country's soybean farmers are being hurt because China, for purely 'negotiation' reasons, isn't buying," the US president wrote on the Truth Social network. "We make so much money from tariffs that we're going to use a small portion to help our farmers," he added.

The measure is similar to one adopted during his first term, when the Republican also waged a trade war with China. In 2019, the administration provided more than $22 billion in aid to rural producers.

Aid, however, isn't expected to arrive before 2026, according to Dan Basse, president of the consulting firm AgResource. In a video released a few days ago, the executive stated that a short-term transfer was already unfeasible, and the situation worsened on January 1st with the shutdown — the US government's shutdown due to the failure to pass the budget bill by the legal deadline.

Also last week, during a White House press conference, Trump stated that China would resume purchasing US soybeans. "The soybean issue is where I think we'll see more openness," he told reporters.

On the same day, however, the US government announced an additional 100% tariff against China and indicated that the meeting between Trump and Xi scheduled for the end of the month could be canceled. The American Soybean Growers Association reacted, declaring itself "extremely disappointed."

“Trade wars are harmful to everyone, and these latest developments are deeply disappointing at a time when soybean farmers are facing a deepening financial crisis,” Ragland said last Saturday (10).

On Monday (13), however, US Treasury Secretary Scott Bessent said that Trump is on his way to meet with Xi in South Korea. According to Bessent, there were substantial communications between the two sides over the weekend.

"There has been a significant de-escalation of the situation," the secretary said in an interview with Fox Business Network. "President Trump said the tariffs will not take effect until November 1st. He will meet with Chairman Xi in Korea. I believe that meeting will still take place."