From meat to grains, trade war is a boon to Brazil and Argentina

By Clarice Couto, Dayanne Sousa and Jonathan Gilbert

Brazil and Argentina are emerging as early winners in the global trade war that’s upending agricultural markets.

Escalating tensions between the U.S. and China – the world’s biggest supplier and consumer of farm products, respectively – have created an opening for the South American nations to ramp up exports of everything from meat to grains in a bid to seize global market share.

The newest opportunity seems to be meat. U.S. President Donald Trump’s tariffs on eight of America’s top 10 beef buyers have already redrawn trade flows, raising exports of Brazilian beef to halal markets including Algeria and Turkey. Japan, America’s second largest beef client, is now in advanced talks to start buying cheaper meat from Brazil. 

And any economic slowdown triggered by the trade war will move other international beef buyers to shift purchases to lower cost suppliers, especially Brazil, according to Datagro market analyst Guilherme Jank. 

So far, China’s shift away from U.S. products is shaping up to be a major driver of Brazilian and Argentine exports. The Asian superpower in April ordered a huge amount of soybeans from Brazil, giving the country a leg up in its farming rivalry with the U.S., and recently reached a deal to restart poultry shipments from Argentina. 

Increasing shipments to Europe is a possibility, too, with talks for a trade deal between Mercosur – the South American trade bloc – and the European Union gaining momentum, according to Marcos Jank, senior professor of global agribusiness at Insper.

Argentine sorghum producers may also benefit from higher prices since there aren’t many alternative suppliers of the grain used in animal feed. China is the world’s top buyer, and the U.S. the top supplier. 

Should the trade restrictions continue into the fall, when the U.S. kicks off its harvest of soybeans and corn, South American grain producers will have another opportunity to offer alternative supplies. 

“If this mess lasts until the fourth quarter, which is when the U.S. harvests and China and Europe switch their soy and corn purchases there, the U.S. isn’t going to be able to export and those countries will keep buying in South America instead,” said Ivo Sarjanovic, a former commodities trader and professor in the Torcuato Di Tella University in Buenos Aires. 

Still, price volatility in agricultural markets remains a risk to all exporters. While physical premiums for soybeans in Brazil and Argentina initially climbed on the tariff announcements, for example, a global recession would likely dampen demand and pressure futures prices lower.

But even in that case, Datagro’s Jank said, “it’s more likely that an economy that imports beef will consume cheap beef rather than expensive beef.”