Interaction between Brazil and The United States on the world market for soybeans:a dynamic analysis based on the stochastic trajectories of exports

Abstract

Known as the major exports product from Brazil, soybean is found to be the most responsible grain for generating foreign exchange and employment in the Brazilian economy. The international market of this good shows two major producing and exporting countries, namely, Brazil and The United States of America (USA). In this work, we sought to analyse the way how exports of one of these countries were affected by the exports of its competitor. Initially, we found that the world market of soybeans could be characterized as an oligopoly, and thus we could use the Cournot duopoly model . Then, we used the Vector Autoregressive methodology for describing the relation between soybean exports from Brazil and USA. According to results, by using the simulation techniques, we designed the stochastic trajectory of both exports, which enabled us to find the way how one of these countries would react against decisions of its competitor, also considering the existence of totally random shocks. Simulations showed that, initially, export from a country is negatively affected but, with the possible intent of regaining its market share, the affected country would react by increasing its exports on subsequent periods. Brazil would need much more effort to be on the market top list than the USA. Therefore, over time, both countries alternate on the market leadership.