Commercial interdependence between Brazil and China

China has 20% of the world's population but only 7% of the arable land, according to the FAO. In 2000, China was self-sufficient in food; In 2020, the self-sufficiency rate was 77%, with a projection of falling to 65% in 2035. Although the concern already existed, it was during the “tariff war” between the USA and China (2019), worsened by the Covid-19 pandemic. XNUMX, that food assumed greater importance for Chinese leaders.

Understandably, no country is comfortable being politically or commercially dependent on others. This goes for energy, medicines or food. China is no different, it is uncomfortable with its high dependence on Brazilian soy. Mutatis mutandis, the high dependence on Brazilian agricultural exports to China is not comfortable. We believe it is essential for Brazil to diversify on three fronts: a) export to more countries; b) export more products; c) add value and open new markets.

The Chinese government's concerns about food security have some underlying factors, namely: a) China may never return to being self-sufficient in food, on the contrary, it has been losing competitiveness; b) the political and cultural difficulties of purchasing land in other countries to maintain an exclusive export channel grow; c) the dynamism of political and commercial alliances constitutes scenarios that are difficult to predict in the medium term; d) global climate changes are intensifying, which could depress agricultural production and increase prices.

Taking into account these trends that shape the future, the Chinese government is preparing a set of public policies and actions to ensure food supply for the Chinese population. One of the policies - already implemented - is the reduction of waste. This is a global problem, it is estimated that a third of food is wasted from farm to table, and it must not have been much different in China. President Xi Jinping has become personally involved in urging minimal waste. China's storage capacity is 910 Mt and, in 2019, losses of 35 Mt were estimated during storage alone.

Public policies

Although soybeans originate in China, the country imports more than 80% of the soybeans it consumes. And the range of suppliers is narrow. Due to the 16% reduction in Chinese production (2021), its government is studying an incentive package to increase soybean production, which includes financial subsidies, incentives for the conversion of rice areas to soybeans, soybean-corn consortiums and the incorporation of marginal areas. To this end, it will invest in a bold R&D program to develop adapted genetics, using biotechnology. New legislation regulating GMOs is being studied, although little is known about its details other than that it is more favorable to the development and use of GMOs.

The advance on marginal areas occurs through the progressive occupation of fertile areas for accelerated urbanization and the advancement of road and industrial infrastructure. Less fertile areas imply higher production costs. Merely replacing one crop with another can induce new imbalances and is not a permanent solution. It is expected that climate change will further shrink the available area, at the same time increasing the risk of harvest failure.

In line with the above, the development of new varieties, cultivars or hybrids is considered essential, which means the organization of the entire chain that guarantees not only the creation of new genotypes, but their rapid access by farmers. There will also be easy access to genetic material from abroad, which adapts to your conditions.

But the problem goes beyond soy. In 2021 there was an 18% increase in grain imports by China, reaching a total of 165 Mt. The Chinese are very concerned about the fact that the international food market is dominated by the so-called ABCD (ADM, Bunge, Cargill and Dreyfus). China is studying formulas to decisively influence the market, creating mechanisms that give it control over its imports, especially meat, milk, soybeans and corn.

Supply guarantee

Brazil must be attentive to the understanding of Chinese leaders that the diversification of suppliers is the crux of the issue of China's food security policy. From this perspective, political alliances will have a strong commercial component. The strengthening of ties between China and Russia goes in this direction, with Russia being able to be a major food supplier. If China will be harmed by climate change, the opposite is predicted for Russia, with the possibility of an increase in area and cultivation window.

Furthermore, other countries neighboring China will potentially make up the list of exporters, and attention should be paid to the inclusion of post-war Ukraine in this analysis. Geographic proximity synergizes the commercial relationship, in addition to reducing freight costs. Consider, also, that China already has aggressive food production programs in Sub-Saharan Africa, one of the elements of its food security chessboard, and its intention is to expand it.

China acts strategically, holistically, to solve its food security problem. Brazil is only part of the solution. As such, we must make efforts to continue being a protagonist in the international food market in light of these changes, to consolidate the strength of its agribusiness, with the diversification of products and markets as our motto.

By Décio Luiz Gazzoni, agronomist, researcher at Embrapa Soja and member of the Sustainable Agro Scientific Council