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November 16, 2018

Brazil could increase Soybean Meal Production by 45%

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

With the trade dispute between the United States and China unresolved, Brazilian officials feel there is an opening that could be filled by Brazilian soybean processors. That was the take away message form a meeting last week in China between representatives from the Brazilian Vegetable Oil Processors Association (Abiove) and Chinese officials.

The chief economist from Abiove, Daniel Furlan, was interviewed recently by Noticias Agricolas and his opinion, the trip was very productive. He laid out a scenario to the Chinese officials that Brazil could help China continue to grow by supplying more soybean meal, soybean oil, and even biodiesel to China.

Furlan explained that the Chinese has not yet given a clear signal that they are willing to purchase more Brazilian soybean meal, but he expressed confidence that the long and complex negotiations could come to a successful conclusion in several months.

Brazil could increase its soybean meal production by 45% just by utilizing its current idle crush capacity, which is currently 20 million tons of soybeans. This idle capacity could produce an additional 16 million tons of soybean meal in addition to the current 36 million ton production bringing the total to over 50 million tons.

Furlan acknowledged that competition from Argentina will be strong because Argentina is currently the world's largest soybean meal exporter, but Furlan feels there is space for Brazilian soybean meal in the international market principally due to the increased demand from China.

Even if the trade dispute between the United States and China ends up being resolved, the U.S. soybean industry will probably never return to where it was before the trade dispute erupted. China is looking to diversify its sourcing of soybeans and they are not likely to purchase the same volume of soybeans from the Unites States going forward as they did in the past. This opens up space for more Chinese purchases from South America and farmers in the Southern Hemisphere are more than happy to step into that space.