Welcome to our weekly roundup of news from South America.
Mosoj ESG provides information, data and analyses relating to South America integrating Environmental, Social and Governance topics to promote sustainable development.
In soy we trust
The history of Soy in South America is a surprisingly young one, in spite of its importance to the region’s economy, with soybean alone accounting for over $32 billion of export revenues in 2019 and representing 55% of the world’s production. Of note, most of the South American production (~98%) finds itself in the Mercosur countries, with Brazil representing ca 34% of global production.
Over the past 20 years, the region grew by 221% to reach a total production of 184 million tonnes by 2019. Brazil’s growth was particularly striking as it recently overtook the US as the leading global producer, possibly as a result to the US – China trade spat.
Source: FAOSTAT
In line with the growing production, the exports value also grew albeit at a faster rate as the price of Soyabean also increased over that period of time. Indeed, price went up from $183.5 in 2000 to $327 by end-2019, and is expecting to reach over $500 per tonne this coming March. The main beneficiary of this increase in price and quantity exported has been Brazil, exporting close to $26 billion in 2019 compared with $3.4 billion for Argentina.
Source: FAOSTAT
Importantly, these figures do not include all of the derivative products of Soy. Indeed, if we were to take all the soy products and derivatives together, export revenues for Argentina would reportedly amount to ca. $15 billion in 2019 (est. $15.7 bn for 2020!).
Over the years, Argentina has managed to remain amongst the top producers, and in 2019 was the most productive country in terms of yield per hectare. At the other side of the spectrum, it is interesting to note the gradual collapse of Venezuela’s efficiency.
In an ESG context, productivity is an important metric as it can provide insights in terms of governance – management of natural capital/biodiversity, and education, since we are able to measure a country’s ability to adapt and adopt technological improvements.
Finally, there is little surprise that China is the biggest buyer, by orders of magnitude. Even when compared to large economic blocs, China dominates, buying around 60% of all soybeans in the world compared to 10% for the EU (27), or 4% for the USMCA.
And so it begs the question, why are they buying so much? Well, there is much literature linking this to China’s increasing appetite for protein, and this is reflected in the end-use of soy production.
Thus, soybean production is intrinsically linked to the demand/production of pigs and chicken in China. Given the Chinese government plans to decrease the country’s meat consumption by 50% in the next decade, we should expect a slowing down of meat consumption, but much will depend on China’s growing 350 million middle-class.
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