April 5, 2011
Chinese Invest in Direct Purchase of Soy from Brazilian Farmers
After years of speculation, it now appears that the Chinese have decided on how they will expand their presence in Brazilian agriculture. Their original idea of directly purchasing Brazilian farmland to produce soybeans has been thwarted by new regulations announced last August that places limits on the amount of Brazilian farmland that can be purchased by foreign individuals, companies, or governments. With land purchases no longer being an option, the Chinese have decided instead to invest in the needed infrastructure and processing facilities that will allow them to purchase soybeans directly from Brazilian farmers thus bypassing the multinational grain companies.
China is by far the largest importer of soybeans and one of their goals is to limit some of the recent price volatility associated with soybeans and other agricultural commodities. They feel the best way to do that in Brazil at least, is to develop methods to purchase soybeans directly from Brazilian farmers thus bypassing the multinational grain companies that currently serve as the middleman.
Chinese officials have been in contact with cooperatives and state officials in at least six Brazilian states including: Mato Grosso, Bahia, Santa Catarina, Goias, Rio Grande do Sul, and Tocantins. The most ambitious project announced thus far is slated for the state of Goias where they plan to invest R$ 12 billion over the next ten years in the agriculture and infrastructure of the state in order to guarantee the direct purchase of 6 million tons of soybeans per year. If fully implemented, the Chinese enterprises would purchase the equivalent of 75% of all the soybeans currently being produced in the state.
Another major project recently announced is in the state of Bahia where they will invest R$ 4 billion in a new crushing plant and storage facilities. In the state of Santa Catarina in southern Brazil it was announced that they will invest R$ 200 million at the port of Sao Francisco do Sul in order to facilitate the export of soybeans to China.
Chinese are taking a similar approach toward the procurement of petroleum and minerals as well.
Before the new restrictions on purchasing farmland, the Chinese had purchased land in the states of Bahia, Tocantins and Rio Grande do Sul