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December 1, 2017

Brazilians and Chinese met to Discuss Investments in Mato Grosso

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

In recent years there have been numerous meetings between Brazilian and Chinese officials exploring ways the two countries could cooperate to expand agricultural trade. The Chinese are looking at infrastructure projects such as railroads, ports, highways, in addition to storage and processing facilities that would lower the cost of transporting the products to China. They are also exploring the possibility of being direct buyers of Brazilian products, thus bypassing the international grain companies.

It looks like one of the first investments to come to fruition will be the construction of grain storage facilities in the state of Mato Grosso.

Last month, the governor of Mato Grosso was accompanied by state officials and agribusiness leaders as they met with Chines officials and businessmen in Beijing. Earlier this week, the Chinese officials met with their Brazilian counterparts in the city of Cuiaba, which is the capital of Mato Grosso, to further advance their negotiations.

The first major investment by China will probably be the building of grain storage facilities in the state of Mato Grosso. The plan is to construct 30 grain silos across the state at a cost of R$ 1.5 billion. The construction would be completed by a Brazilian company.

The state desperately needs additional storage space due to the ever expanding grain production in the state. The situation is especially critical when commodity prices are low like they are presently because farmers tend to hold onto the production, thus making storage space even more scarce.

Officials from a Chinese food company announced at the meeting they will expand their operations in the state and they expect to double their soybean purchases in the state within 5 years.

Brazilian officials and producers have been working diligently on developing sustainable agriculture by promoting increased production on existing land instead of clearing new land for additional production. This approach is very appealing to environmentalists who have been working very hard to limit deforestation in the Amazon Region. It is also appealing to investors who do not want to be blamed for deforestation. In that light, local officials feel these Chinese investments are a testament to the progress being made on sustainable agricultural production.