China Bluster on Decoupling from U.S. in Agricultural Trade

China says it is prepared to decouple from the U.S. in agricultural trade as it "diversifies" its trading partners, but this “opportunity” comes with some “risks.”

On April 23, a bombastic Chinese news article cited purchases of 40 cargoes of Brazilian soybeans to prove that “Americans Need to Know: Chinese People are Really Not Afraid of Decoupling from the United States.” The article asserted that the United States would be harmed more than China by decoupling and insisted that American farmers are “desperate” and “the public is panicking.”

On April 13 "Chinese Soybeans Take the Lead in Decoupling and Supply Chain Reconstruction Under Trade Friction" announced that China is ready for "complete decoupling." This article also boasted that China is expanding domestic soybean production and claimed that Brazil is a "safer and more friendly partner" with cheaper soybeans that purportedly have a higher oil and protein content and fewer impurities. However, the author acknowledged that Brazilian soybeans cannot fully replace American soybeans due to the seasonal supply availability from northern and southern hemispheres, "stable" quality of American soybeans, and shorter shipping time from the U.S. The article asserted that China needs to break the "monopoly" of American capital by supplying seeds, fertilizers and shipping services in the soybean supply chain. The article also cited a need to develop a local currency settlement mechanism since China-Brazil transactions still need to be settled in dollars.

On April 15, China's Farmers Daily published "Build a safe stable global agricultural supply chain," authored by a researcher from the Agriculture Ministry's economic research institute. Farmers Daily began by quoting Xi Jinping’s proclamation that “security and stability” are the basis for a “new development pattern” and regurgitating Xi’s declaration of “major changes in the world unseen in a century” and Xi’s pronouncement that “the industrial and supply chain must not break down at critical moments.” This article acknowledged that China has 2 or 3 suppliers for imports of corn (93% comes from U.S., Brazil and Ukraine), soybeans (97% from Brazil, U.S. and Argentina), and wheat (81% from Australia and Canada), but claims that it is still too risky to have just a few suppliers. Noting Brazil’s dominance as a source of soybean imports, the author pointed out the Brazil is subject to extreme weather and climate risk. 

The Farmers Daily author urged China to further diversify import sources by forging closer ties with agricultural exporting countries. He called for leveraging the Belt and Road Initiative and promoting Chinese foreign investment in the Black Sea region, South America, and Eastern Europe (no mention of North America) to “break the monopoly of international grain traders.” This includes nurturing Chinese conglomerates in grain trading, processing, trading and agricultural technology to develop global industry clusters and penetrate the high-value links of the value chain.

China views itself as a first mover in new technologies that will magically solve agricultural problems. The Farmers Daily author touted China’s e-commerce platforms as a base for improving digital trade in agricultural goods. Artificial intelligence will improve demand forecasting, inventory management, and logistics optimization. The author predicted that Chinese companies will introduce and apply new agricultural productivity tools such as AI, drones, and robots to reshape global agricultural value chains.

A May 8 article, “China-Brazil Agricultural Cooperation Warms Up,” announced the resumption of imports from 5 banned Brazilian suppliers and gushed over this week’s visit of Brazilian President Lula Da Silva for the Community of Latin America and Caribbean States (CELAC) meeting in Beijing. In a poke at the U.S., the article described the Brazilian president’s visit as a sign of "his sincerity in trade" and featured a comment from Brazil's Agriculture Minister that Brazil is a trustworthy long-term trade partner and can fill the market gap left by the withdrawal during the U.S.-China trade war. The article echoed the talking point of deepening government cooperation in agricultural research by emphasizing the Brazil’s Agriculture Minister and the head of its agricultural research institute will be included in the delegation.

China's industry faces supply and price pressure from the growth in South American farm commodity imports. Last week, Futures Daily’s review of 2024 financial reports concluded that most companies inthe Chinese fats and oils industry are under growing financial pressure from fluctuations in raw materials prices, fierce market competition and pressure to control costs. The article displayed a table showing steep decreases in prices for major vegetable oils over the past 3 years. Futures Daily commented that the Chinese vegetable oil market is facing pressure from declining demand, escalating global trade disputes, and expectations of a recession. A company’s procurement director cited the Brazilian soybean harvest, smaller-than-expected cuts in Southeast Asian palm oil production, growing supplies of vegetable oils and rising inventories for driving down prices in the industry.

China’s beef industry has also been under pressure from falling prices coinciding with rapid growth in beef imports from South America. During 2024 China tripled its rejections of imported meat, including beef from South America. Last December, China launched a special safeguard investigation of beef imports (still ongoing) that attracted attention from Brazilian, Argentine, and Uruguayan officials. In March China suspended two Argentine and three Brazilian suppliers of beef. In a post last month, this blog noted the large volume of Ecuadorian shrimp rejected by China since 2020.

Boston University’s Global Policy Development Center’s discussion of this week’s CELAC meeting in Beijing noted possible discussion of the beef special safeguard tariffs and efforts by Ecuador, Peru, and Argentina to gain market access in China for various fruits, beans, lentils, pork, beef, and dairy products. The Boston University article anticipates dicussion of currency initiatives and noted concerns about a regression of South America’s economy into a supplier of primary commodities as a result of growing trade with China.