January 9, 2020


China will not increase grain import quotas for US-China trade deal


Local media group Caixin quoted senior agriculture official Han Jun, who said China will not hike its low tariff import quotas for corn, wheat and rice to make up for increased US agricultural goods purchases, reported Reuters.


This move will mean it might be difficult for China to reach the import commitments outlined in the United States-China phase one trade deal to be signed on January 15, 2020.


US President Donald Trump said the new agreement will double the US$24 billion in purchases China made before the trade war, reaching US$40 billion to US$50 billion per year.


The exact details of the agreement have not been made public, and China has not confirmed the amount quoted by the US President.

The comments from senior agriculture official Han highlights China's intention to safeguard its domestic farmers, even when the country is pressured to increase US agricultural goods purchases.


Terry Reilly, Futures International senior commodities analyst said if China were to purchase US agricultural goods exclusively, it would alter global grain markets and increase costs for grain importers from China.


He added that demand for feed grain has declined, with the African swine fever outbreak in China decimating close to half of the country's swine herds.


Meng Jinhui, Shengda Futures corn analyst believes the market is concerned about the effects of increased US grain imports, and the government's announcement aims to sooth market nerves in China.


In December 2019, Han said China will purchase additional US wheat, rice and corn, which led to rumours that China will hike annual quotas on imported wheat, rice and corn at a 1% tariff rate. Han is a vice agriculture minister and part of the trade deal negotiating team.


According to Caixin, Han said the quota is provided to international markers and not amended for just one country.


Before the trade war began, China purchased US$534 million worth of the three US grains in 2017. This leaves space for an additional surge in imports within existing tariff quotas.


Another major US agriculture purchase by China are soybeans, which aren't covered by the current grain quotas. Soybeans accounted for more than half of China's US agricultural purchases before the start of the trade war.


Demand for soybeans as livestock feed has declined as the African swine fever has decimated close to half of China's swine herd. In recent months, China has approved more meat import sources worldwide to supplement dwindling pork supplies.


The annual grain import quotas for China are 9.64 million tonnes for wheat, 5.32 million tonnes for rice and 7.2 million tonnes for corn.


The US has won a World Trade Organisation ruling, which judged that China infringed its responsibility to implement the quota fairly.


-      Reuters