April 14, 2011

Brazil and China to Expand Commercial Ties

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

On her first visit to China, the president of Brazil, Dilma Rousseff, and the president of China, Hu Jintao, recently signed a series of accords designed to expand commercial ties between the two countries. In a joint meeting between the two leaders, the Chinese president pointed out that since 2009 China has been the main purchaser of Brazilian products and that Brazil has a trade surplus with China.

China is already the largest purchaser of Brazilian soybeans and iron ore and the Chinese president promised to further open up the Chinese market to Brazilian agricultural goods such as pork, beef, poultry, tobacco, and citrus. In a closely timed announcement, the Brazilian Minister of Agriculture indicated that three meat processing facilities in Brazil have been approved for the export of pork to China. China is the world's largest market for pork consuming 50 million tons per year. The vast majority is domestically grown, but China is expected to import 480,000 tons of pork in 2011 and that is expected to increase in future years.

While only three meat processing plants have been approved for exporting pork to China, the entire pork industry is expected to benefit from increased sales to China which would then opens up more opportunities in the domestic market.

The two presidents also signed accords to expand ties in politics, defense, science and technology, sports, education, agriculture, electrical energy, telecommunications, aeronautics, and tourism. A number of Brazilian businessmen accompanied the president to China.

Over the last several months various Chinese companies both private and governmental have announced plans to build soybean processing and transportation facilities in Brazil to facilitate the movement of soybeans and soybean products from Brazil to China. Their overall goal is to source more raw materials such as soybeans at a cheaper price by bypassing the multinational grain companies. The Chinese had originally intended to purchase Brazilian farmland in order to produce the soybeans themselves, but recent changes in Brazilian laws now restricts how much farmland a foreign individual or government may purchase.