November 11, 2003

 

 

Brazil Sees China Huge Export Market For Soybeans & Dairy Products

 

During the peak of the 2003's bumper soya bean harvest, 2,600 lorries and 400 rail wagons lined up each day to deliver their cargoes at Paraguana port in southern Brazil.

 

With demand from China stretching capacity to its limits, authorities at the world's largest public grain port are planning to double its processing capacity to 100,000 tons a day.

 

Paraguana lies most of China's demand for Brazil's exports such as iron ore and soybeans. Sales of these exports have increased drastically from about $1.08 billion in 2001 to $2.52 billion (€2.2 billion, 1.5 billon sterling pound) last year and nearly $4 billion during the last 10 months.

 

Word of Brazilian companies doubling and tripling their sales in China is spreading through South America's largest economy like Marco Polo's first reports of wealth in the Far East. Everybody wants to be on the boat to China. Seminars, trade missions and cultural exchanges are flourishing. Translators have never been so busy.

 

"All of Brazil's exporters are eyeing China," says Manoel Cintra, president of Brazil's commodity and futures market (BM&F), who was in Shanghai last week to prepare for the opening of the market's office there, which will be only its second foreign presence after its office in New York.

 

He expects demand from Chinese importers seeking hedges on currency and price fluctuations on Brazilian commodities to generate an annual turnover of between $1 billion and $1.5 billion for the BM&F.

 

This year five Chinese trade missions will have visited the BM&F in Sao Paulo.

 

"The Chinese government wants every child to drink milk. Do you know what 1.3 billion glasses of milk could mean for Brazil's dairy farmers?" says Charles Tang, who is head of the Brazilian-Chinese chamber of commerce, which has grown to include 11 offices in Brazil and five in China.

 

Indeed, the chamber is carrying out feasibility studies for bilateral trade products from dairy products and orange juice to vehicle parts.

 

The Cacique group from southern Parana state has launched its Cafe Pele brand in a direct challenge to the two multinationals.

 

"Brazil is trying to make up lost time in the Chinese market," says Mr Tang.

 

So far the focus of exports to China has been on agriculture, where Brazil boasts some of the world's most competitive advantages. This year, for instance, the China Animal Husbandry Group signed an agreement to import beef, chicken and pork worth $100 million directly.

 

"China still pays less for beef than other countries," says Pedro Bourdon, commercial director of MBM, a trading company, "but in five years it will be a huge market for us."

 

Brazil has the world's largest commercial herd of cattle.

 

Critics warn that Brazil's export boom to China could collapse once China's supply capacity catches up to domestic demand. But Edmar Cid Ferreira, president of Banco Santos, a local bank, strongly disagree with the speculation.

 

"The Chinese are looking for long-term suppliers of food and technology and we have both. They're coming to us to set up joint ventures." Brazil has also nearly trebled its exports of soybean oil to China this year. While China is gradually modernising its outdated soybean crushing industry, Abiove, the Brazilian vegetable oil association, forecasts it will be a net importer of soybean oil for at least a decade.

 

The Chinese consume about 14 litres of soybean oil per capita; Brazil 20 litres and US 45 litres. "There is still quite a bit of room for growth," says Carlos Lovatelli, head of Abiove.

 

The opening of China as an important export market, some analysts suggest, may already be influencing Brazil's position in trade negotiations with the US and Europe, both of which it accuses of unfair subsidies and barriers to farm trade.