Brazil, China trade deal to aid food security

New protocols between Brazil and China have opened the door for more grain trade, allowing two of the world's largest agricultural producers to shore up food security.

Greater exports to China could create a more stable market for Brazilian producers, while for China, giving the green light to trade in these key commodities can help secure predictable supplies in the face of disruptions to global supply chains.

China and Brazil recently agreed to new protocols that allow the Latin American giant to export large shipments of corn and peanuts to China, as announced at the sixth meeting of the China-Brazil Highlevel Coordination and Cooperation Committee on May 23. Negotiations also will start this month on expanding trade in other commodities.

"Brazil and China are complementary economies, and proof of this is the need that China has at this moment for corn. Brazil is a partner that can meet China's needs," said Henrique Reis, international relations manager in Sao Paulo for the China Trade Center Group.

In a joint news statement, Brazil's Ministry of Agriculture, Livestock and Supply and the Ministry of Foreign Affairs said that the "compromises reached demonstrate the dynamism of the bilateral relationship in agriculture" and the potential for increased trade between the two countries.

Brazil is the world's third-largest corn producer after China and the United States, followed by Argentina and Ukraine. As Russia and Ukraine account for about 15 percent of the world's corn production, the ongoing conflict between the two has affected global supply.

"Brazil… will have a surplus of 1.1 million metric tons to export beyond the initial demand. So, the Chinese request would represent 36 percent of the Brazilian corn surplus," said Matheus Dias de Andrade, international relations adviser at the Brazilian Confederation of Agriculture and Livestock.

High yield

The country produced more than 87 million tons of corn in the 2020-21 season, and forecasts from CONAB, the state-owned national supply company, suggest production will top 115 million tons in 2021-22.

At the same time, more corn trade between Brazil and China could have an impact on global prices, which have been affected by the Ukraine conflict "and the consequent rise in prices (about 8 percent in Europe), especially for raw materials", said Marta Peris-Ortiz, an expert in innovation and sustainability at the Polytechnic University of Valencia, Spain.

The significant increase in prices for commodities like corn "explains the reconfiguration that is occurring and will continue to occur in the markets globally", Peris-Ortiz said.

However, Brazilian producers still need to create confidence in the stability of supply and the prospects for a long-term trade relationship with Chinese buyers.

Fernando Castello-Sirvent, an economist and professor at the ESIC Business and Marketing School, Spain, said risks of severe famine and political destabilization are rising around the world.

With all this uncertainty, more agreements will likely be needed to ensure a stable and long-term supply of these commodities, according to the Brazilian Association of Corn Producers.

"Once Brazil is a competitive and reliable corn producer with the total capacity to supply the Chinese market, the relationship will probably turn into a long-term one," said Dias de Andrade.

The writer is a freelance journalist for China Daily.