Cargil, the world's largest agricultural commodities trader, plans to increase its investments in Brazil to expand soybean processing and biofuel production, according to Paulo Sousa, president of the multinational in the country.

The company is also "strongly" evaluating new investments in ports and in modernizing and increasing the capacity of its warehouses, he said in an interview. Already investments in railroads, evaluated in the past, are ruled out for now.

Cargill understands that there are logistics operators that are more capitalized and able to expand the Brazilian rail network, Sousa said.

"There are other areas that make more sense to us," he said, citing SAF (sustainable aviation fuel) as an example. "We want to grow in soy processing and renewable fuels in Brazil." The country, which accounts for more than half of global soybean supply, received R$1.2 billion in investments from Cargill last year, a record.

Increasing soybean export and processing capacity in Brazil is critical to lessening the impacts that supply shocks have on the global food and renewable fuel industry.

Argentina, which used to be the world's largest exporter of soybean meal and oil, has faced consecutive years of drought and economic problems that reduce investment in the sector. This year, soybean meal hit an eight-year high on the Chicago Stock Exchange. In Brazil, storage and logistics problems have contributed to reducing export prices.

Last year, Cargill moved 41 million tons of soybeans and grains, up 15 percent from 2021, driven by a record harvest. But rising logistics costs have squeezed margins, Sousa said. Net income fell to R$1.2 billion last year, from R$1.8 billion the previous year.

The outlook is better for this year. Soybean crush margins have reached record levels in Brazil as a historically high crop and losses in Argentina attract global buyers to the country, which is in a good position to serve importers, with "more than perfect" weather conditions allowing Brazil to harvest another record crop, Sousa said. While margins have already retreated from highs, they are expected to remain historically high in 2023, he said.

The 2022-23 soybean crop from the world's largest producer is so big that Brazil is shipping the oilseed even to rivals Argentina and the U.S. There is a steady flow of soybeans leaving by waterway from Mato Grosso do Sul to the Rosario region, although shipments may have already peaked this year, he said. Even so, more exports to the neighbor should happen by the end of the year, he added.

Ample supply of the oilseed has also pushed Brazil's export premiums to negative levels, but the increase in volumes handled by Cargill will more than offset the recent price drop, according to Sousa.

On the corn market, the president of Cargill said that the record harvest of the safrinha expected in the coming months will lead Brazil to displace the U.S. as the largest global exporter of the grain for the first time, which should become a trend.

"Brazil should take the lead in the corn market with the same category that we did with soybeans. In three or four years, it is better to get used to seeing Brazil as the largest exporter of corn in the world," he said.

Source: Money Times