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Brazil preparing for end of U.S.-China trade war, mulls response

BRASILIA, March 13 (Reuters) – Brazil is conducting studies on how it could be impacted by the end of the trade dispute between China and the United States, which could help Latin America’s largest economy to formulate a response if it disrupts soy exports, agriculture officials told Reuters.

U.S. Trade Representative Robert Lighthizer said on Tuesday that negotiations are entering their final weeks on a possible accord, that could see China remove a 25 percent tariff on U.S. soy that upended global farm trade and shifted demand toward Brazil.

Regardless of a potential Sino-American resolution, Brazil does not have the soy supply this year to match last year’s China-driven spike in exports, said Eduardo Sampaio Marques, the Agriculture Ministry’s policy secretary who oversees market analysis and subsidy programs.

“It is very difficult to repeat last year’s numbers,” he said by phone.

Brazil had record-high production in the 2017-18 crop year and on top of that drew down the vast majority of its soy stocks for exports to China, which sought to replace U.S. soy amid the trade war.

This year, output is lower and the country does not have inventory to redirect to exports, he added.

Lower Brazilian supplies make it more likely China will need to buy soybeans from the United States, where record stocks are piling up in storage.

China in July imposed a 25 percent tariff on U.S. imports, including soybeans, in retaliation for Washington’s duties on Chinese goods.

The shift in supplies is reflected in agriculture statistics agency Conab cutting its January forecast for soy exports by 5 million tonnes to 70 million tonnes of the oilseed as of March, compared to exports of 83.6 million tonnes in 2018.

Brazil is watching and preparing for the potential end of the trade war, according to Orlando Leite Ribeiro, farm trade secretary.

“We are paying attention to the negotiations, and we are preparing studies to confirm the impact on Brazil in the short and medium term,” Ribeiro said.

The government is talking to affected sectors, including the soy industry, but they have not called for the government to take any specific action, he noted.

Based on the results of the studies, it is possible the government could identify a way to make its exports more competitive, Ribeiro said, without elaborating on what those actions may involve.

Sampaio, who oversees farm subsidy programs, said there is little he can do as his department does not have any instruments that can offer targeted support for exports to specific countries.

But the ministry could help to coordinate companies in the private sector to form some unified response, as it has in the past, Sampaio said.

The ministry consults regularly with the Chinese ambassador, has a representative in China and Brazilian Agriculture Minister Tereza Cristina Dias plans to visit the country later this year to maintain a good trade relationship, he said.

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