Trump's Return: China's Soybean Bonanza from Brazil

As the political landscape shifts with the return of former U.S. President Donald Trump, so too may the dynamics of the global soybean market. China, the world's largest importer of soybeans, has been increasingly reliant on Brazilian supplies, a trend that could further intensify under renewed trade tensions between the U.S. and China.

Brazil's soybean exports reached a record 3,744 million bushels in 2023, up 29% from the previous year, while U.S. exports declined by 14% to 1,789 million bushels. This disparity highlights the shifting power dynamics in the soybean market, with Brazil's dominance on the rise. China, accounting for about 60% of global soybean imports, is the primary driver of this growth, with 73% of Brazil's exported soybeans destined for the Asian giant.

If Trump reinstates tariffs on U.S. soybean exports, as he did in 2018, China may once again turn to Brazil to satisfy its insatiable demand for animal protein and edible oils. This trend could further strengthen Brazil's position in the global soybean market, as Chinese buyers seek alternative suppliers to mitigate risks associated with relying too heavily on a single source.

However, the Brazilian real's appreciation during the Trump administration could have a mixed impact on Brazilian soybean exports to China. While a stronger real makes Brazilian exports more expensive, it also enhances import purchasing power for Chinese buyers. Historically, when the real appreciated, Brazilian exports to China initially slowed but later recovered (see Figure 1 in the Background, which shows Brazil's soybean exports to China in millions of bushels from 2008 to 2023). This suggests that, despite short-term setbacks, the long-term demand dynamics between Brazil and China are robust.

The U.S. domestic soybean demand, particularly for the renewable diesel sector, has been growing steadily, with the USDA projecting a 2,300 million bushel crush for the 2023/24 marketing year. However, Trump's return as president could potentially disrupt this trend. If Trump reinstates tariffs on Chinese soybean imports, as he did previously, it could lead to a reduction in Chinese purchases, potentially easing domestic pressure on U.S. soybean supplies. This could, in turn, reduce the need for the U.S. to export soybeans, leading to increased availability for domestic consumption and the renewable diesel sector.

In conclusion, the return of Trump to the political stage could significantly reshape the competitive dynamics between U.S. and Brazilian soybean exports, with China set to play a pivotal role in determining the future of the global soybean market. As the world's largest importer, China will continue to drive demand, while Brazil's dominance in soybean exports will likely strengthen under renewed trade tensions between the U.S. and China. The U.S. domestic soybean demand, particularly for the renewable diesel sector, could also be impacted by changes in U.S. trade policies under Trump's return.