Lula’s Win Keeps Brazil’s Soybean Pipeline to China Flowing, but Farmers Face a Costly Squeeze
Brazil supplied 75% of China’s soybean imports in the first nine months of this year, and analysts expect that flow to continue after Luiz Inácio Lula da Silva’s re-election, according to a Reuters analysis published on 29 October. His rival, Flavio Bolsonaro, a Trump ally, had promised closer ties with the United States after Washington threatened Brazil’s growing trade with China. China bought $100 billion of Brazilian goods last year, against $38 billion from the US.
Markets reacted sharply to the result, which the analysis calls surprising. The real fell as much as 13% in a single day. A weaker currency raises the local-currency value of dollar-denominated exports, and coffee, sugar and grain exporters hedged by selling futures.
Farm leaders are worried. Government debt reached 82.9% of GDP in August and interest rates stand at 13.75%, making rural debt costly, while soy and corn farmers face low prices and high input costs. The analysis also points to Brazil’s rare earth reserves, the world’s second largest, and expects Lula to open the sector to all investors while requiring more processing inside Brazil. His government raised the ethanol blending rate to a record 32% this year, which Datagro says depresses ethanol prices and can push mills to make more sugar.
Source: reuters.com
