Posted on February, 19, 2025 at 10:04 am
After decades in which the United States has been economically, politically and culturally dominant, the world is drifting into a new era.
The emergence of the BRICS coalition, which includes Brazil, Russia, India, China and South Africa, is perhaps the biggest factor in this shift. Founded in 2009, the coalition has a combined GDP and population that is now greater than the G7 countries (United States, Canada, France, Germany, Italy, Japan and the United Kingdom). BRICS nations produce 44% of the world’s grain and account for one-third of wheat and rice exports and one-quarter of corn exports.
Veteran economist and grain market analyst Dan Basse, president of Chicago, Illinois, US-based AgResource Inc., describes this emerging alternative world order as a duopoly. Determined to increase the economic and political strength of its members, one of BRICS’ stated goals is to establish a currency which could replace the US dollar as the dominant reserve currency. While that’s not expected to happen soon, it’s something to keep an eye on, Basse said, noting that it’s now acceptable in Brazil to pay for soybeans using the Chinese Yuan.
“I don’t see us going back,” Basse told me during a recent conversation. “I only say that because US dominance in the world has been diminished. After 70 years of capitalism where you make something and then decide where to make it cheapest and sell it around the world — that model has been broken. I think what’s happened with the Ukraine-Russian war, what’s going on with India’s rise and Africa’s importance going forward, the US is going to have a difficult time maintaining the dominance that it had before. To me, this duopoly looks very logical going forward.”
The driving force behind these respective coalitions will be the United States and China. Tension has always existed between the two superpowers who have vastly different political and economic worldviews, but two events in recent years widened the rift: the trade war launched by the United States in 2018 and the COVID-19 pandemic that originated in China and killed millions of people worldwide and devastated the global economy.
With tensions mounting, China has reduced its dependence on the United States as a grain supplier and strengthened ties with other nations, most notably Brazil, which is now China’s leading supplier of soybeans and corn. It also is investing heavily in natural resource-rich Africa, trying to wrestle influence away from the United States on the continent with the fastest-growing population and economy and 60% of the world’s uncultivated arable land.
As all this is transpiring, protectionism is being revived in a number of countries, most notably the US under recently elected president Donald Trump. Ten days into his second term, Trump slapped tariffs on imported products from Canada, Mexico and China. Notably, Trump started the trade war with China in 2018. Viewed by many as an outdated practice that fuels inflation, tariffs were a mainstream economic force up until about 90 years ago. Entering the 21st century, many believed that free trade was here to stay and protectionism would not re-emerge, but here we are.
What will all this mean for the global grain industry? Most likely fewer markets to export to and stagnant or lower commodity prices for the foreseeable future — not what any farmer or grain trader wants to hear.
Source: Baking Business