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What do Brazilian biological input companies, China's food security and the current shift in global agribusiness supply chains have in common?

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In recent years, the bioinput market has become increasingly present in agriculture, showing vigorous growth in Brazil. According to various market source information, the segment is broad and generates around R$675 million, and there are 50 million hectares using various biological products for the development of plants and in controlling pests and diseases. It is predicted that by 2025, the country will become the second largest consumer market for bioinputs, according to information from the Brazilian Agricultural Research Corporation (Embrapa).

On a global level, the success of the segment should continue for the next few years. According to market research firm Research and Markets, the biological inputs sector is expected to achieve revenues totaling US$18.5 billion by 2026, a growth of 74%, while chemical defensives are expected increase by only 3.7% during that period.

Brazil is the main supplier of agrifood products to China, accounting for some 20% of Chinese imports. By 2030, the ″Middle Empire″ will be responsible for a 25% increase in animal protein consumption on the planet. Anticipating their strategic positioning, major Chinese agricultural companies are buying operations and stakes in Brazilian agribusiness(1), becoming one of the main foreign investors in the sector in Brazil.

The opportunities in Brazil for Chinese companies in the agricultural sector have been extensively covered, but fewer studies or even discussions have been done on the opportunities in the opposite direction for innovative Brazilian companies in the sector within the Chinese market.

Despite the good outcomes of bilateral negotiations aimed at opening Beijing’s market for products such as peanuts(2) at the end of 2022, the Chinese are the world's largest consumers, consuming legumes worth approximately $800 million annually, and Brazil still positions itself as an exporter of products without high added value.

In addition, China and Hong Kong occupy the first position in the rankings for world agribusiness imports, with 33% of Brazilian exports in the sector being destined for these markets, representing $34 billion per year, which corresponds to 400% of the volume of exports destined for the US.

A significant part of Brazil’s supply of agricultural and food products is matched by Chinese demand, but it is China that exports more inputs to Brazil and not the other way around. This fact is not negative, as there are considerable opportunities for innovative Brazilian biotechnology companies to export their inputs, which are already making a difference in the Brazilian market, to the Chinese market.

With innovation and sustainability playing an increasingly important role in international trade and foreign direct investments (FDI), it is not different in the agribusiness agenda between Brazil and China. An evidence of this is the book, titled, ″China-Brazil partnership in agriculture and food security,″ which was published in 2020 by Escola Superior de Agricultura Luiz de Queiroz (Esalq USP) and China Agricultural University (CAU), two of the top five agricultural schools in the world. The work brings together articles by Chinese and Brazilian specialists.

There is also an opportunity for Brazilian companies specializing in non-commoditized biological inputs, which are unique and proven solutions in Brazil, in the agricultural sector of China. The Chinese have a wide variety of biological input companies, but most produce assets that are already commoditized and have low and medium added value. Growth promoters, macro and microbiological pest control and prevention agents, as well as products with consortia of Brazilian microorganisms or based on a single Brazilian microorganism, have good opportunities for being successful in China, as long as they have proven and documented results on Brazilian farms and are imported and sold by consolidated Chinese companies that distribute agricultural inputs.

The practice of using biological inputs on crops offers many advantages for producers, in an era of sustainability and amid the global efforts to reduce pollution and mitigate the carbon footprint, so more and more companies and governments comply with ESG standards(3). Many of these inputs have both environmental and economic benefits. Bioinputs contain low toxicity and are biodegradable, factors that promote sustainability in agriculture and have reduced impacts compared to common agrochemicals.

Bioinputs are products made from microorganisms, or even plant, organic and natural materials. Their use is one of the best strategies available for farmers, as they can represent between 5% and 35% of average productivity gains, in addition to representing financial gains and a return on investment (ROI) several times the amount invested in bioinputs. In terms of biological control, the advantages are even greater, and Brazil is a leader in the sector that is expected to become the second leading market in the world by 2025.

Regarding consumers, the benefits are extremely positive, mainly in terms of combating pests and diseases, improving soil fertility and ensuring the availability of nutrients for plants. Examples of bioinputs are biological control agents, biostimulants, biofertilizers, growth promoters, biological soil conditioners and biological inoculants.

Amid the disruption caused by war in Ukraine to the global trade of grain, with both Ukraine and Russia being two of the world's largest producers, it is important to note that for many years, Beijing has been practicing a policy of seeking arable land in Africa to use as production and export bases, with the aim of reducing dependence on Brazil, USA and Argentina, and lowering the cost of transporting grains to Chinese ports.

An example of this is the agreement with Tanzania for the purchase of soybeans in 2020. The East African country produces 6 million tons of soybeans per year, according to 2020 data, while Brazil produces 150 million tons of the grain, according to data from the 2022-2023 harvest(4).

It is worth remembering that Tanzania was the last country on the African continent without an agricultural trade agreement with China. This treaty was promised by Beijing in 2018 during the China-Africa Cooperation Forum(5). In return for the purchase of grains and mineral raw materials, the Chinese sell electronics, machinery and other higher value-added goods, creating benefits for Beijing's trade balance.

Like Tanzania, Nigeria already exports soybeans to the Chinese market, which are produced on farms owned by Nigerians and foreigners. The numbers are still not significant compared to the products bought from Brazil and the US. However, it is important to highlight the fact that there are opportunities for companies that wish to produce in Africa and export to Chinese public and private customers. Europeans, Arabs and Indians are already positioning themselves in this market, but it is still rare or non-existent, depending on the African country, for Brazilian companies to do the same.

Regarding Brazil’s technological leadership in tropical agriculture, it would not be an exaggeration to stresses that it can benefit from a gradual change in the axis of production and export of grains to China. By also using our bioinputs, companies can gain an advantage in the cost matrix, especially those that establish small factories on the African continent. Today, the majority of traded agricultural inputs are petrochemical products controlled by Indian, Middle Eastern and European companies, in addition to a few Pan-African companies, such as Dangote Fertilizer(6).

In addition to extending their production range to the other side of the Atlantic, pioneering Brazilian agribusiness companies can not only plant and export from their future African bases, but they can also establish themselves in China and produce biological inputs for the Chinese market, and subsequently export inputs ″developed in Brazil, made in China″ to the Asian market.

Considering the events that change the strategies of global agribusiness and food industry supply chains, we will soon see the first cases of success in the expansion of our grain production and innovative and sustainable products, which are already successful in Brazil.
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