The Grain Front--Shaking America, Surging Brazil" - May 2023

The Grain Front--Shaking America, Surging Brazil" - May 2023

The U.S. has been a major grain exporter to China and other Asian countries since the latter half of the 20th century, leading the world market, especially in soybean and corn exports. However, in the 2020s, Brazil's grain production expanded rapidly and the U.S. market share declined. Combined with the effects of U.S.-China trade friction and climate change, the power structure of the international grain market is changing dramatically.

### The Rise of Brazil
Soybean fields spread across the vast expanses of South America. Once trailing behind the U.S., Brazil is now becoming a major player in the grain market, and thanks to government agricultural support measures and infrastructure development since the 2000s, soybean exports will exceed 150 million tons by 2023, surpassing the U.S. as the world's largest exporter. Furthermore, the country is increasing its competitiveness by strengthening direct trade with China and reducing transportation costs.

### U.S. Market Pressure
The U.S., once known as the "breadbasket of the world," has been affected by the U.S.-China trade friction, and exports to China have declined. Corn and soybean prices became volatile and export volumes declined from 2022 onward; by 2023, the profit squeeze on U.S. farmers became so pronounced that increased subsidies were being discussed. Midwestern farmers are at the mercy of a drastically changing market, with concerns about passing on agriculture to the next generation.

### Climate Change Impacts
Behind the market competition, climate change is casting a shadow as a new threat. Although Brazil is located in the tropics, recent increases in precipitation and the development of irrigation technology have enabled more stable agricultural production. On the other hand, in the U.S., droughts and extreme weather in the western part of the country have led to more fluctuating harvests, and the once stable supply system is beginning to show its shadow.

### Chinese Demand and Future Outlook
China, the world's largest grain importer, will import about 160 million tons of grain in 2023. Of this, imports from Brazil will increase and the share of U.S. grain will decrease. From the perspective of food security, the Chinese government is diversifying its sources of supply, and is expanding trade with Russia and Argentina. There is a possibility that a third or fourth player may emerge in a market that was once dominated by the U.S. and Brazil.

With the growth of Brazil, the once stable grain market has now been shaken up significantly. Will the U.S. find a new strategy in this upheaval, or will market dominance shift to South America? The course of the grain front will have a major impact on global food security.