Source: Oleoscope (Russia)
While the trade conflict initiated by U.S. President Donald Trump with China might benefit Brazil’s soybean exports, senior executives at Cargill Inc. warn that it could pose challenges to the company’s ambitions to boost its oilseed processing capabilities within Brazil, according to Bloomberg.
Paulo Souza, President of Cargill Brazil, explained that the rising Chinese appetite for Brazilian soybeans is likely to intensify competition within the South American market for the same beans used by facilities extracting oil to produce soybean oil, biofuels, and soybean meal. The uncertainty surrounding tariff policies could jeopardize Cargill’s expansion plans in processing capacity.
Souza remarked, “We continually assess investment flows, but the persistence of adverse tariffs on processing Brazilian soybeans might force us to reevaluate our strategy.” He further noted the difficulty in advocating for increased Brazilian production given the stable global demand.
Cargill has made significant investments in Brazil’s agriculture sector to enlarge its soybean processing infrastructure. In 2023, the majority of Cargill’s capital in Brazil was directed towards acquiring three soybean processing plants and biodiesel units from Granol, a grain processor, along with four storage warehouses across the country. The previous year saw an additional investment of R$1.7 billion in infrastructure upgrades, including a new grain terminal aimed at boosting shipments from ports in the Amazon region. For the current year, the company anticipates investing between R$1.5 billion and R$2 billion, focusing on expanding biodiesel and soybean meal production as well as enhancing its barge fleet.
On the financial front, Cargill Brazil reported an accounting loss of 1.7 billion reais (approximately $275.3 million) for 2024, a sharp contrast to the 2.5 billion reais profit recorded the year before. This downturn was largely attributed to a stronger U.S. dollar, which increased the company’s debt when converted to reais. Additionally, revenue in Brazil decreased by 14%, amounting to R$109.2 billion, reflecting a 12% drop in shipments across all products caused by weather-related crop failures.
Souza commented on the broader implications, stating, “When demand shifts from one country to another, prices tend to rise, which in turn dampens demand. From my perspective, there is no real benefit to a trade war.”