TRADE: Brazilian Soya Farmers Protest US Subsidies

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Jul 23 1999 (IPS) - Brazilian soya farmers are up in arms over the U.S. practice of subsidising U.S. soya producers, in a trade conflict directly linked to the crash of commodity prices.

Accounting for a global turnover of 17 billion dollars, soya heads international trade in farm products. Brazil is the world’s second largest producer, with 31 million tonnes, topped only by the United States, which puts out around 80 million tonnes.

But two years ago prices began to slump, bottoming out at the lowest levels seen in three decades – around 155 dollars a tonne.

The U.S. government guarantees a price of 5.26 dollars per bushel – around 193 dollars a tonne – for soya farmers, footing the bill for the difference between that price and what they actually obtain from the market.

But Brazilian farmers, who are urging the government of Fernando Henrique Cardoso to file a complaint before the World Trade Organisation (WTO), argue that the U.S. practice of subsidising soya farmers distorts competition and artificially inflates production, while excess supply has been holding down prices.

The protests have arisen in response to today’s low prices, caused by the international financial turmoil that has shaken Asia, Russia and Brazil, according to Flavio Francia Junior, an analyst with the Zafras & Mercados company, which specialises in information on the agricultural sector.

For decades, global consumption of soya has risen steadily, and any increase in production has been absorbed by the market. But a drop in the rate of growth of demand has now led to a flooded market.

According to Francia Junior, the outlook should clear up in the next two or three years, when the global economy and trade rally.

The analyst based his optimistic view on his assertion that soya is “the cheapest source of protein” and that there is no waste involved in its processing. “One hundred percent of the grain is converted into by-products” – soybran and oil, he said.

The United States and Brazil, as well as Argentina – which is expected to produce some 18.5 million tonnes this year according to the Brazilian Association of the Industry of Vegetable Oils (Abiove) – account for more than 80 percent of global soya production.

With its aggressive policy, the United States is making a bid to recover market share lost in recent years. Its exports of soybeans, which stood at 24 million tonnes in 1996/97, are expected to drop to 21 million tonnes in the present trading year for soya, which runs through September.

Brazil, meanwhile, has multiplied its sales of soybeans by 2.5 since 1994/95, although its exports of soybran and oil, of greater added value, failed to grow.

Soya, which Brazil has produced commercially for 25 years, is the Latin American giant’s top export, bringing in some five billion dollars a year.

Although Brazil’s soya industry has the capacity to process the country’s entire crop, only two-thirds are presently processed, said Francia Junior. This year, Abiove expects the country to export 9.5 million tonnes of soybeans, 10.8 million tonnes of soybran, and 1.4 million tonnes of soy oil.

Abiove president Cesar Borges said the government committed an error three years ago, when it exempted soya products from a tax on trade in an attempt to boost exports.

According to Borges, the measure favoured Argentina, whose soya production has climbed in the past few years, by allowing the neighbouring country to double its sales of bran and oil to around 25 million tonnes and to outstrip Brazil as the world’s top exporter of those products.

Brazil and Argentina, the two largest partners of the Southern Common Market (Mercosur) trade bloc, dominate the market for soya by-products because the United States consumes two-thirds of its harvest at home and mainly exports soybeans.

Europe and Asia are the top consumers of soybeans and soya by- products.

A rallying of international demand for soya basically depends on a rise in the consumption of meat, because the main by-product, soybran, almost exclusively goes into animal feed, said Francia Junior.