What Brazil Is Buying
Cotton and ethanol leap into Brazil’s top 5 imports from the US
by Bill Armbruster, blog anchor
China has roared past the US to become Brazil’s top trade partner, but the US is still the top exporter to the Latin American giant, and those exports – plus the US surplus in bilateral trade – are growing rapidly. In the first six months of this year, Brazil’s purchases of US goods totaled $15.7 billion, while its exports to the US totaled $11.7 billion, giving the US a $4 billion surplus, according to Datamyne’s Brazilian trade statistics. Those totals compare with $12.1 billion in US exports to Brazil in the first half of 2010, and imports of $9 billion.
Taking a closer look at the trade data, I came across a few surprises.
Refined oil, coal and turbojets topped the list of US exports in the first half of this year but – here’s one surprise – there were stunning increases in cotton and ethanol, enough to vault these commodities from out of nowhere and leapt into the fourth and fifth positions.
Now Brazil is itself a major producer of both. Yet it imported $328 million worth of US cotton and $259 million of ethanol in the first half of the year, compared to just $21 million for cotton in the same period last year and a measly $2 million in 2009. Ethanol imports were $9 million in the first half of both years.
What was even more stunning about the explosion in cotton trade is that it came after a well-publicized World Trade Organization ruling two years ago in favor of Brazil in a long-running dispute over US cotton subsidies.
When the US balked over complying with the WTO ruling, Brazil threatened to impose nearly $1 billion in retaliatory tariffs on a list of 102 items, as well as intellectual property. (Our blog covered the Brazilian ultimatum here, here and here.) That dispute was settled in June 2010, helping to pave the way for the jump in imports. A poor cotton harvest in Brazil and booming consumption by its growing textile industry also contributed to the surge.
But demand for US cotton is likely to slow as Brazil reaps a very large cotton harvest in the crop year that began August 1, according to Matt Herrick, a spokesman for the US Department of Agriculture. Moreover, USDA forecasts a 12% drop in US cotton production because of severe drought in Texas.
Brazil is the world’s second largest ethanol producer after the US, but it hasn’t produced enough to meet demand from its booming auto market, according to Diego Bonomo, senior director for policy at the Brazil-US Business Council.
Brazil uses sugar cane to produce ethanol, and farmers there can earn more by using cane to produce sugar, according to Ron Lambert, the American Coalition on Ethanol’s vice president for market development.
The association representing Brazil’s sugarcane producers says 2011-2012 ethanol output will not be sufficient to meet the demands of the growing Brazilian market. However, Brazil is reducing its requirements for crop-based fuel, which could result in lower demand for ethanol imports.
Looking at trade in the other direction: Crude oil is by far Brazil’s leading export to the US, with $2.6 billion pumped in during the first half of this year, up from $1.8 billion last year.
Second in value, and the leading containerized import from Brazil to the US is coffee. Imports totaled $745 million in the first half of the year, nearly double the $375 million last year. Brazil is the fourth leading source of US coffee imports, behind Colombia, Vietnam and Indonesia.
Here’s yet another surprise I gleaned from Datamyne’s database: Starbucks’ has a growing taste for Brazilian coffee. Its imports nearly doubled in the first six months of this year, to 1,021 shipments, compared with 544 in 2010 and just 217 in 2009. Folger’s is the top buyer of Brazilian coffee, with 1,589 shipments, up from 1,333 shipments in 2010, but still below its total of 1,757 shipments in 2009.
Next: House bill challenges the 2010 agreement that settled cotton dispute
Bill Armbruster, the anchor for the Datamyne Blog has covered shipping and trade for 30 years as a reporter and editor with The Journal of Commerce and Shipping Digest. “I’ll be blogging on headline news and current issues in oceangoing commerce, trying to shed some light on the backstories and, wherever I can, supply some sound advice for shippers.” Write Bill care of [email protected].
The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.
Date posted: September 12, 2011