As the repercussions of the US-China trade war, initially ignited during the first term of the Donald Trump administration, show signs of reigniting, a prevailing view suggests that Brazil stands to once again significantly benefit in the agricultural export market. With the US threatening additional tariffs of up to 145% on Chinese goods and China likely to retaliate with tariffs of 125%, Brazil's agricultural exports to China are already demonstrating a clear upward trend.

According to a report by the British Financial Times (FT) on April 13th (local time), citing data from the Brazilian Trade Association, Brazil's beef exports to China in the first quarter of this year increased by a third compared to the same period last year. Furthermore, Brazil's poultry exports to China also showed significant growth, increasing by 19% in March. Of particular note is the change in the soybean market. Brazilian soybeans, which were trading at a $0.25 discount to US soybeans in January, are now trading at a premium of $1.15 on the international commodity market, clearly indicating a shift in market dynamics.

Rodrigo Alvim, Overseas Director at Minas Port Group in Brazil, stated in an interview with the FT, "China is moving quickly to secure a stable supply chain not only for soybeans but also for other major agricultural products, and demand for US agricultural products in China will gradually decrease." In fact, US agricultural shipments to China plummeted by a staggering 54% in January of this year compared to the same period last year, lending credence to this analysis. Given that China was a major customer, consistently importing 90% of US sorghum exports and half of its soybean exports in the past, this shift is bound to significantly impact the US agricultural sector.

The American Soybean Association (ASA) President Caleb Ragland has sent a letter to President Trump urging negotiations with China, highlighting the growing sense of crisis within the US agricultural community. Ragland warned, "US agriculture is in a more vulnerable position than it was during the first Trump trade war," adding, "We lost nearly 10% market share in China at that time and have not recovered it since."

Adding to the woes, China did not renew the export registration for hundreds of US beef production facilities last month, effectively blocking a significant portion of the $1.6 billion (approximately 2.28 trillion Korean won) annual beef exports to China. According to an anonymous source, shipments of US soybeans, corn, sorghum, and wheat to China have all decreased significantly this year. Many grain processing companies in China have halted imports of US grains due to reduced margins caused by tariff increases.

Aurelio Pavinato, CEO of SLC Agricola, Brazil's largest grain producer, conveyed the local sentiment, stating, "Amid China's trend of diversifying its import sources, Europe is also recognizing Brazil as a stable alternative supplier, leading to a surge in overseas demand for Brazilian agricultural products, and export prices are also on the rise."

According to an analysis by Jim Sutter, CEO of the US Soybean Export Council (USSOYBEN), Brazilian soybeans traded at approximately 20% higher prices than US soybeans during the first US-China trade war, which acted as a catalyst for increased investment in Brazil's agricultural sector. As the US competitive advantage gradually weakens, the share of US products in China's food import market sharply declined from 20.7% in 2016 to 13.5% in 2023, while Brazil's share remarkably increased from 17.2% to 25.2% during the same period.

Amid this situation, the European Union (EU), which is also experiencing trade tensions with the US, is considering retaliatory tariffs on US agricultural products and seeking alternative suppliers. Especially with the ratification of free trade agreements (FTAs) with South American countries on the horizon, Brazil is emerging as a strong alternative supplier to replace the US for the EU.

However, Jim Sutter cautioned that while Brazil is currently experiencing a 'bumper crop,' its agricultural supplies could be rapidly depleted if China and the EU simultaneously focus on imports from Brazil. Pedro Cordero, President of the European Feed Manufacturers' Federation (FEFAC), also expressed concern, stating, "We may face a situation where we have to compete with China and other countries for the same agricultural products, which could lead to higher feed prices and ultimately higher food prices."

In conclusion, the escalating US-China trade conflict is likely to provide an unprecedented boon for Brazil's agricultural export market. The decline in US agricultural exports to China, China's strategy to diversify its import sources, and the EU's potential demand for import substitution are all converging to offer Brazil a golden opportunity to further solidify its position as an agricultural powerhouse. However, securing a stable supply capacity to meet the surging demand and preparing for the volatility of the international grain market will remain challenges for Brazil to address.