BREAKINGVIEWS-China’s Brazil ties are sown beyond soybeans

By Ka Sing Chan

HONG KONG, Oct 27 (Reuters Breakingviews) - Soybeans have become a trump card — not for Donald Trump, but for Xi Jinping. China’s leader is expected to resume purchases of the crop from the world's largest economy as part of a trade deal when he meets with his U.S. counterpart on Thursday in South Korea. Turning a crucial import into trade war leverage is a win for China’s planning model.

U.S. Treasury Secretary Scott Bessent said on Sunday he anticipates that China will revive “substantial purchases” of U.S. soybeans for several years. China stopped buying the American produce after Brazil’s President Luiz Inácio Lula da Silva visited the People’s Republic in May. Trump had described the refusal to buy the legume from the U.S. as “an economically hostile act” and threatened to stop buying China’s cooking oil.

It’s hardly a like-for-like retribution. The U.S. is China’s top market for used cooking oil — a popular input for renewable fuels — but at $1.1 billion last year, the export was worth only a fraction of the $12.6 billion China spent importing Uncle Sam's soybeans. While U.S. farmers are struggling to find a replacement market, the People's Republic has long set out to cultivate Brazil into a soybean superpower.

Beijing has provided satellite surveillance to track deforestation, and Chinese fertiliser exports to the biggest Latin American economy grew to $18 billion in 2023, nearly triple 2018 levels. China’s agricultural conglomerate COFCO has invested more than $2.3 billion in Brazil since entering the market in 2014, including a port in Santos capable of handling up to 14 million tonnes of grain a year.

Crops from Latin America could become even more competitive if Beijing is permitted to build a cross-continental railway linking Brazil’s Atlantic ports to Peru’s Pacific coast, a project that could divert traffic from the Panama Canal. Brazil is also one of the most active countries in the world in collaborating with the Chinese central bank in the yuan settlement of commodity trades.

Chinese investment is pushing into other areas too. Lula himself cut the ribbon this month for BYD's 002594.SZ massive factory in Bahia that would create 20,000 jobs. The site was once occupied by U.S. automaker Ford Motor F.N. Meituan 3690.HK will roll out its food delivery service in coming weeks after pledging to invest $1 billion in Brazil.

Overreliance on Brazil can be risky too, but for the time being, China will be able to keep importing its soybean requirement, regardless of how long any new trade deal with the U.S. lasts.

CONTEXT NEWS

U.S. Treasury Secretary Scott Bessent said on October 26 that he anticipates that China will revive substantial purchases of U.S. soybeans. He added that U.S. farmers “will feel very good” when U.S. President Donald Trump and Chinese President Xi Jinping announce a trade deal on October 30.

U.S. President Donald Trump said on October 14 that he believed China was “purposefully not buying” American soybeans this year and described it as an “economically hostile act”.

In retaliation, he threatened to stop importing used cooking oil from China. The trade was worth $1.1 billion in 2024, according to the World Bank. China imported $12.6 billion worth of soybeans from the United States in 2024.