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Trade War Prompting Brazil’s Farmers to Ditch Sugar for Soy

The ongoing trade war between the U.S. and China, along with an extended global glut of sugar, is prompting Brazil’s farmers to switch from sugar production to soy.

Shifts in trade flows redirecting Chinese demand for soy toward South America have resulted in Brazil’s soybean acreage expanding by two million hectares, while acreage of sugarcane has decreased by 400,000 hectares.

Last year China bought 53.8 million tons of soy from Brazil at a value of $20.3 billion, accounting for half of the country’s total soybean production. These numbers only grew with China’s imposition of a 25 percent tariff on U.S. shipments earlier this year. In the first half of 2018, Brazilian soybean exports to China reached 36 million tons, representing a 6 percent increase over the same period a year before, and in July alone, Brazil’s soybean exports to China jumped 46 percent year-on-year to 10.2 million tons.

After years of a difficult global market, the shift in crops is further threatening Brazil’s sugar milling industry with 60 mills closing over the past five years in Brazil’s center-south region, while the remaining mills are fighting to source cane. Indeed, many sugar mills, which often plant their own acreage for supply, are switching to soy themselves.

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