Assessing the Grain and Oilseed Dynamics between South America and China

By Carl Zulauf

Since 1980, the evolving agricultural landscapes of South America and China have engaged in a significant exchange within the grain and oilseed markets. South America’s growing production surplus of grains and oilseeds has largely counterbalanced China’s increasing consumption deficit. The combined demand-supply balance for grains and oilseeds between these regions has remained surprisingly stable over the past four decades.

Data and Methodology

This study analyzes the production and domestic consumption of grains and oilseeds in South America and China, utilizing the Production, Supply, and Distribution Online (PSD) database provided by the U.S. Department of Agriculture, Foreign Agriculture Service. Domestic consumption includes both the domestic production and imports. The analysis begins from the 1981/1982 crop year, following the deviations in agricultural production and consumption trends seen in the previous decade. The study includes a variety of crops: feed grains (barley, corn, millet, oats, sorghum), food grains (rice, rye, wheat), and oilseeds (cottonseed, peanuts, rapeseed, soybeans, sunflowers), measured in metric tons.

South America: Transition to a Major Exporter

Historically, South America was self-sufficient in grains and oilseeds until the late 1990s. Since then, production has surged, resulting in an average annual surplus of 178 million metric tons from 2021 to 2025—equivalent to 37% of total production. This surplus has attracted significant attention to South American grain and oilseed exports.

China: Decline into Import Dependency

On the flip side, China also experienced self-sufficiency until the late 1990s; however, its domestic consumption has rapidly outpaced production. Between 2021 and 2025, China’s consumption exceeded production by an average of 162 million metric tons annually, representing 20% of its total consumption. Despite this deficit, China manages to produce 80% of its grain and oilseed needs.

South America — China (SAC): A Cooperative Relationship

The combined production and consumption metrics of South America and China reveal an enduring relationship. The annual differences between production and domestic consumption, expressed as a percentage of consumption, indicate a consistent production surplus for the SAC region. This surplus averages 3.3% from 1981 to 2025, remaining stable without significant fluctuations over time.

Implications for U.S. Prices

A regression analysis revealed that the SAC production surplus has limited explanatory power regarding the U.S. grain-oilseed price changes, only accounting for 5% of the variability. Statistically, the confidence level in this relationship rests at 84%, falling below commonly accepted thresholds for significance.

Discussion

While Brazil often garners attention within the South American context, it’s essential to recognize that multiple countries contribute significantly to regional grain and oilseed production. Notably, in the 2024 crop year, nations beyond Brazil accounted for 37% of the region’s total production.

With South America’s harvest timing being out of sync with that of the northern hemisphere, this arrangement benefits China by diversifying its sourcing options and alleviating stresses on its supply chain. Current geopolitical dynamics between the U.S. and China, including sanctions and tariffs, further solidify the close ties in the grain and oilseed sector between South America and China.

However, it is crucial to observe that the historical data reveals no upward trends in the SAC production surplus since 1980. The limited explanatory power of this surplus on U.S. price volatility suggests that concerns about the strengthening ties between South America and China may be premature unless year-over-year production surplus trends shift significantly.

Future Outlook

The next installment in this analysis will delve into the trends of U.S. grain-oilseed production surpluses, followed by an examination of the surpluses from the rest of the world. A subsequent article will use regression analysis to compare the impacts of U.S., SAC, and other global production surpluses on changes in U.S. grain-oilseed prices.

Data Note

The U.S. composite price index for the grains and oilseeds discussed was calculated using various methodologies to ensure accuracy and relevance, combining per-bushel prices and weightings according to production shares across different crop types.

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