The global soybean triangle rests its points on China, the U.S. and Brazil. And for the U.S., it’s become the Bermuda triangle of lost exports.
“I think so far this year, 75% of the soybean exports from Brazil have gone to China,” noted Matthew Kruse, speaking at the Farm Progress Show on a panel addressing the Brazil versus the USA in the Global Grain Game. “It isn't just soybeans. That's where it gets most of the focus. But it's cotton, beef, everything, even coffee.”
What the numbers tell the market and producers is this: It’s time to change conventional thinking about demand for U.S. grain.
“A lot of the narrative is that ... China needs to buy our beans. … That's kind of been the narrative. And I think that's becoming less and less the case," Kruse said.
The China narrative is highlighted in this week’s Ag Marketing IQ in Depth, a conversation with Kruse, an Iowa farmer who is president of Commstock Investments; Cesar Cruz, a Brazil native who is director of research for Advance Trading Inc.; and Ben Potter, senior editor at Farm Futures.
“I think it's the elephant in the room really is China,” Potter said. “And this triangle between China and the United States and Brazil is something that we definitely have to pay attention to.”
Brazil in 2022 became the dominant player in the global soybean market and has since continued to strengthen trade agreements with China. Ultimately, China has strategically reduced its dependence on U.S. agricultural products while strengthening ties with Brazil. Yet, the U.S. still outpaces Brazil in production.
“If you combine Argentina and Brazil, corn production is actually less than half of what U.S. produces,” Cruz says. “But when you combine their exports, they've been exporting more, more and more.”
As a result, demand for U.S. soybeans is down and reframing the triangle is essential to change the situation. How to do that?
“I think it's still in everyone's interest to work out a trade deal,” Kruse says. “That's kind of my biggest concern. And it obviously needs to happen sooner rather than later”
To hear more from the Farm Progress Show panel on the global soybean triangle, watch Ag Marketing IQ in Depth. For the full panel discussion, watch Brazil versus the USA in the Global Grain Game.