South-South Commerce and Market Dynamics

Some have referred to the 21st century as the Asian century because of the growing economic and political influence of actors such as China and India have gained on the world stage. The increasing demand of Asian industry has helped strengthen the ties between Latin America, Africa, and Asia. For example, over the last decades, China has quickly become Colombia’s second trade partner, after the United States. Today, China represents 10.5% of the total exports leaving and 18.4% of all imports entering Colombia. This article explores the ongoing dynamics amongst some of these emerging nations.

South-South Commerce and Market Dynamics

While the Western hegemony, led by the United States and Europe, was particularly evident during the 20th century, Asia’s impressive economic and political rise is changing world dynamics. Latin American nations, such as Brazil and Chile have become profoundly tied to China’s economy. In fact, one of China’s first Free Trade Agreements (FTA) worldwide was with Chile, who exports a great amount of copper to Chinese manufacturers. Likewise, Brazil’s main commercial partner is China with approximately 17.9% of all imports into Brazil and 18.6% of all exports leaving the country.

Corn Production Worldwide

Even though both Brazil and China are leading producers of agricultural commodities, China has a clear advantage in regards to corn production, which is destined for food, animal feed, and biofuel. Reflecting a substantial increase in yields, Brazil’s 2016/17 corn production is expected to be of 82.5 million tons against last year’s 67.0 million tons. Last year was particular harsh on Brazil’s agricultural production due to adverse climatological factors. This led to the import of large amounts of corn from neighbouring countries as well as intercontinental suppliers, such as the United States and China. However, Brazil’s restrictions on genetically modified (GM) products severely limited the amount and types of corn that could be imported from GM markets like the United States.

On the other hand, China’s 2016/17 corn production forecast is of 216 million metric tons. Contrary to Brazil, China’s corn production has been too abundant over the last year; therefore, producers and the government are working on scaling back corn production. The high corn yields in China have led to market saturation and low prices. Historically, Chinese corn producers had enjoyed the advantage of government-fixed minimum prices as well as government sponsored grain purchases for food stocks. However, after consecutive years of highly productive yields, competitive global prices, and fully stocked grain silos, the Chinese government has not only decided to stop purchasing, but also to start selling its own corn reserves. This change in policy will have an impact on corn prices in Asian markets.

Finally, India’s corn production for 2016/17 is expected to amount to more than 24 million tons. Even though this amount represents a substantial increase in the yield of corn from the two previous years, India is still considered a minor producer of this agricultural commodity. China and the United States, whose corn production exceeds the 350 million tons every year, are still world leader in the production of this agricultural commodity. The main destinations for US corn exports over the last few years have been Japan and Mexico.

(Read more about how Brazil Struggles to Meet Domestic Demand for Corn)