Perfect storm on the rise of agricultural products

One of the factors explaining the boom in agricultural commodities over the past 15 years is a perfect storm. And experts in the grain market, unlike climatologists, do not make forecasts.

The economic growth of Asian countries at the head of China since the first years of the last decade, at rates around 9%, has allowed the population to eat better. Rice has been added to pork, chicken and fish, mainly. And the best product to get more animal protein was soy. This triggered demand from the world's top three oilseed producers: the United States, Brazil, and Argentina.

But something began to change in March 2018 when US President Donald Trump decided that it was time to reverse the trade deficit with China and raise import duties on Asian giant products. Beijing responded with soy. I thought the
Farmers, decisive in Trump's triumph in November 2016, would pressure the White House to give up the fight. "Soybean is the first victim of the trade war with China, not its cause," said Enrique Erize, president of the Nóvitas cereal corridor. In the middle of the battle, the African swine fever virus spread through China and resulted in a mbadive slaughter of animals, further reducing soybean demand. Experts believe that the disease is far from being under control. "If that had not been the case, the impact of the conflict would have been less, because China will no longer eat rice and the United States will continue to produce soybeans," Erize adds.

At the same time, Adrián Seltzer, of the Granar broker, said that "China has changed its consumption model, it had to import between 201 and 103 million tons of soybeans for the 2018/2019 campaign and acquire 86 million", he explains.

Experts believe that the bearish scenario could be changed if an adverse weather event occurred in one of the major producing countries. The one that appears on this horizon is precisely the United States, which delays the planting of soybeans due to excessive rains. In this case, we must be attentive to the real forecasts.