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Trump trade war delivers farm boom in Brazil

October 16 2018

The Bella Vita luxury condominium tower rises 20 stories over the boomtown of Luís Eduardo Magalhães in northeastern Brazil. Its private movie theatre and helipad are symbols of how far this dusty farming community has come since it was founded just 18 years ago.
Nearby farm equipment sellers, car dealerships and construction supply stores are bustling too.
The reason: China, a growing trade war between the United States and China is re-ordering the global grains business. In response to Trump administration tariffs on Chinese goods, Beijing this year imposed levies on U.S. agricultural products. Among them was a 25 percent tariff on soybeans, the single most valuable U.S. farm export. U.S. growers sold $12 billion worth to China last year alone.
China, the world’s largest importer of soybeans, has scaled back purchases of U.S. grain to feed its massive hog herd.
It is turning instead to Brazil, which has ridden the wave of Chinese demand for two decades to become a global agricultural powerhouse. Brazilian soybean exports to the Asian country jumped 22 percent by value between January and September, compared to the same period a year ago.
Brazilian producers are not only selling more grain, their soy is fetching $2.83 more per bushel than beans from the United States, up from a premium of just $0.60 a year ago, thanks to stepped up Chinese purchases.
Brazil’s farmers produce much more grain than is needed at home. Foreign customers are responsible for the country’s agricultural boom. Nearly 80 percent of Brazil’s soy exports now head to China.
The city of Luís Eduardo Magalhães is a testament to the importance of this international trade. Located in the state of Bahia, with farms stretching in every direction, the formerly unincorporated rural area in less than two decades has swelled to 85,000 people.
Major employers here include fertilizer factories, seed producers and processors of soy and cotton. The area “relies 100 percent on agriculture,” said Carminha Maria Missio, a farmer and president of the local growers union.
The local real estate market is surging too. Another new luxury condo tower is slated to open next year. Single-family homes are sprouting throughout the city. Prices for prime farmland are up 37 percent since 2012, according to consultancy Informa Economics IEG FNP.
Brazil’s total soy area is expected to expand to a record 36.28 million hectares this season due to robust Chinese demand, according to a Reuters poll of analysts.

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