December 16, 2019

 

US agriculture industry uncertain over US-China trade deal

 

United States farmers and traders said they were unsure regarding China's pledge to purchase US$32 billion agriculture products over the next two years, reported Reuters.

 

US exports and lower commodity prices have dropped because of the US-China trade war, which has lasted 17 months and affected local farmers and traders.

 

Robert Lighthizer, US Trade Representative said China has agreed to boost yearly agricultural purchases from a US$24 billion baseline in 2017 to US$40 billion from the start of 2020. However, how China will keep its pledge is unclear.

 

Traders and analysts said China could raise protein purchases, boosting meat import demand and reduce soybean feed for swine. China is currently managing an African swine fever outbreak, which has decimated swine herds and reduced pork supplies.

 

They also said China may need to purchase more grains.

 

Dan Basse, AgResource Co president said meat is at the top of their demands.

 

Lighthizer confirmed that there are specific targets for China's purchases, but these will not be released to the public so as to not distort the markets.

 

While there has been no commitment to exports from the US, Chinese officials said they might purchase more wheat, rice and corn. In the past, China has rarely purchased these goods.

 

China has also not replied with regard to retaliatory tariffs imposed on US agriculture goods, which include a 33% levy on soybeans and 72% levy on swine. As trade war negotiations continue, US President Donald Trump said the US will leave some tariffs in place.

 

US exports to China dropped to US$13.2 billion in 2018 compared to record highs of US$28.6 billion in 2012. The 2018 numbers are the lowest in ten years, following the implementation of retaliatory tariffs.

 

Bill Luckey, a swine farmer from Columbus, Nebraska with 10,000 swine raised annually, is cautions about increased swine exports to China, citing stiff competition from Europe and South America.

 

Traders and analysts said China will buy more US soybeans if the Chinese government waives tariffs for private importers. However, purchases could slow down early next year as South America has just harvested its cheaper soybeans around the same time.

 

Terry Reilly, Futures International senior commodities analyst said China has pledged to purchase soybeans from Brazil and Argentina through the first half of next year, with Chinese private buyers preferring to buy cheapest origin, which is Brazil. 

 

China may look to import other meats, especially as the country lifted a five-year US poultry ban in November 2019.

 

Bernie Adcock, Tyson Foods chief supply chain officer said China will purchase more poultry once the US-China agreement has been finalised. Tyson Foods is the biggest meat producer in the US.

 

-  Reuters.