Brazil and Argentina are emerging as potential beneficiaries of the ongoing trade war disrupting agricultural markets. Rising tensions between the United States and China are creating export opportunities for South American countries.
These countries can increase exports of various products, including meat and grains. This allows them to gain a larger share of the global market.
The most immediate opportunity appears to be in the meat sector. Tariffs imposed by the U.S. on key beef importers have already shifted trade flows. This has led to increased Brazilian beef exports to markets like Algeria and Turkey. Japan is also in discussions to purchase cheaper beef from Brazil.
China's shift away from U.S. products is significantly boosting Brazilian and Argentine exports. China made a substantial soybean order from Brazil in April. They also reached an agreement to resume poultry shipments from Argentina.
Increased shipments to Europe are also possible. Negotiations for a trade agreement between Mercosur and the European Union are gaining momentum. Argentine sorghum producers could also benefit from rising prices.
If trade restrictions persist, South American grain producers will have another opportunity to offer alternative supplies. This is especially true when the U.S. begins its soybean and corn harvest.
However, price volatility in agricultural markets remains a risk for all exporters. While soybean premiums in Brazil and Argentina initially increased, a global recession could reduce demand. This would put downward pressure on future prices.
Even in a recession, countries importing beef are more likely to consume cheaper meat. This benefits countries like Brazil.