This week, the USDA's Foreign Agricultural Service (FAS) released its 2020 U.S. Agricultural Export Yearbook, a statistical summary of U.S. agricultural commodity exports. Today's update includes highlights from the report, with a focus on soybeans, corn and pork.
Recent news developments point to a potential timeline for ongoing U.S., China trade negotiations. More narrowly, articles have also discussed agricultural variables that have arisen in the talks; and as the trade war persists, farmers are feeling unease about the potential outcome. Meanwhile, tariffs continue to impact the flow of soybean exports.
Wall Street Journal writers William Mauldin and Josh Zumbrun reported last week that, “The U.S. and China are planning two rounds of face-to-face meetings as they seek to wrap up a trade deal, with negotiators aiming for a signing ceremony in late May or early June, according to people familiar with the situation.
Under the tentative schedule, U.S. trade representative Robert Lighthizer is set to travel to Beijing the week of April 29, the people said, with Chinese envoy Liu He coming to Washington the week of May 6. Treasury Secretary Steven Mnuchin also will be a part of the delegation to China, a senior administration official said.
The Journal article noted that, “The talks continue, and the negotiators have a history of missed deadlines, but the provisional plan for face-to-face meetings suggests optimism; recent talks have been conducted via videoconference.”
Mauldin and Zumbrun explained that, “If U.S. and Chinese officials come to a deal in early May, officials then likely would spend a couple of weeks wrapping up the agreement’s text and legal language before a hoped-for presidential signing ceremony as soon as Memorial Day, according to one person.”
Agricultural Trade Issues in Trade Talks
In more specific agricultural related developments, Bloomberg News reported last week that, “China is considering a U.S. request to shift some tariffs on key agricultural goods to other products so the Trump administration can sell any eventual trade deal as a win for farmers ahead of the 2020 election, people familiar with the situation said.
“The step would involve China moving retaliatory duties it imposed starting last July on $50 billion worth of U.S. goods to non-agricultural imports, said the people, who asked not to be identified because the discussions were private. The shift is because the U.S. doesn’t intend to lift its own duties on $50 billion of Chinese imports even if an agreement to resolve the trade war between the two nations is reached, one the people said.
“Another person said China would consider shifting the tariffs to make it easier to meet a proposal to buy an additional $30 billion a year more of U.S. agricultural goods on top of pre-trade war levels as part of a final deal. Last July, China had levied punitive tariffs on American goods including soy, corn, wheat, cotton, rice, beef, pork and poultry in response to U.S. duties.”
Also last week, Reuters writers Chris Prentice and Tom Polansek reported that, “China would likely lift a ban on U.S. poultry as part of a trade deal and may buy more pork to meet a growing supply deficit, but it is not willing to allow a prohibited growth drug used in roughly half the U.S. hog herd, two sources with knowledge of the negotiations said.
Prentice and Polansek pointed out that, “Washington is also pushing for greater market access for agricultural products by seeking to reduce tariffs, lift bans and overhaul regulatory processes. The United States has asked Beijing to lift its bans on the drug ractopamine, which some U.S. pork producers use to boost hog growth, and on U.S. poultry, said two sources briefed on the discussions who spoke on condition of anonymity.
“China’s negotiators have resisted lifting the ractopamine restriction even though Beijing may boost imports of U.S. pork as its own hog herd is devastated by disease, the sources said.”
And earlier this month, Bloomberg writer Michael Hirtzer reported that, “China is reluctant to relinquish control over its domestic grain stockpiles, an issue that has been a sticking point in a broader U.S.-China trade deal, according to America’s top agricultural trade negotiator.
“China is unwilling to open its corn, rice and wheat markets to broader market forces that would allow for freer imports, Gregg Doud, the chief agriculture negotiator for the U.S. Trade Representative, said at an industry conference in Kansas on [April 11th]. China subsidizes its domestic corn and rice growers, which unfairly boosts supplies and limits imports, he said.”
Earlier this month, Bloomberg writers Shawn Donnan and Shruti Singh reported that, “Spring is supposed to be a time of optimism in rural communities across America. It’s when farmers sow the seeds of prosperity into neat, GPS-calibrated rows and when they pray for just the right amount of rain and sun and for prices to hold up so that when fall approaches, there’s a crop worth harvesting. This year is different. In Washington apple orchards, North Carolina hog farms, and soybean fields along the Mississippi River Basin, the season is filled with doubt.
After taking a hit to their bottom line in 2018 of the sort that some say they haven’t seen since the 1980s, farmers in much of the U.S. are hoping for a return to normalcy.
“Trump’s determination to upend the global trading system comes at an inconvenient time for one of the nation’s premier export industries.”
The Bloomberg article stated that, “Economists are still trying to quantify the impact of Trump’s pugnacious protectionism on agriculture. One study by researchers at Iowa State University estimated the various tit-for-tat tariffs imposed in 2018 would cost the farm state as much as $2 billion in lost economic activity, much of it in its corn and pork industries.
“Calculating the drop in export revenue or the collapse in prices for some commodities isn’t difficult, but it’s harder to pin numbers on other economic consequences, such as stalled investment. Travel through farm country, and it’s hard to find a farmer who doesn’t have a story about the combine not bought or the orchard not planted.”
Chicago Tribune writer Alexia Elejalde-Ruiz reported last week that, “As the nation’s No. 1 producer of soybeans, Illinois got walloped when China, the world’s biggest buyer of the legume, imposed a 25 percent retaliatory tariff on U.S. soybeans.
“Soybean exports from Illinois fell by half last year, a loss of $1 billion, according to U.S. Census trade data. Prices plunged and unsold soybeans piled up, with stockpiles of the crop up 30 percent in Illinois as of March compared with a year before due to the combination of the tariffs and a record year for production in the state.
“A $12 billion national aid package offered by the U.S. Department of Agriculture to tariff-affected farmers eased the pain for Illinois soybean producers, most of whom broke even, thanks to the government assistance, said Adam Nielsen, director of national legislation at the Illinois Farm Bureau.”
This week I met w/ Minister Xu of the Chinese embassy. We discussed Kansas Ag producers & our high-quality commodities. Xu said that she wants our approaching trade agreement to be a win-win deal for both countries. I agree, but we must find this win soon, farmers are hurting! pic.twitter.com/1nziYJQpsO— Dr. Roger Marshall (@RogerMarshallMD) April 12, 2019
The Tribune article added that, “China has started purchasing U.S. soybeans again as the two countries negotiate to end the trade war, but the amount remains well below normal levels. Exacerbating the situation is a swine flu epidemic sweeping China’s pigs that has cut the country’s demand for soybeans, which are primarily used in the country for feed.
“John Kiefner, whose family farms about 600 acres in Manhattan, Ill., said current prices don’t cover his cost of production.”
Bloomberg writer Mike Dorning reported last week that, “Many American farmers say today’s economic pressure is the most severe since the farm crisis of the 1980s. Profits have been shrinking since they peaked six years ago and last year fell to half of what they were in 2013. Years of bumper crops sent prices for key commodities such as corn and soybeans plummeting — down 40 percent since 2013.
“Trump’s determination to disrupt global trade abruptly compounded the financial damage last year.”
Focus: Soybean Trade Flows
Financial Times writer Gregory Meyer reported last week that, “The US exported more soyabeans to China in February than it did the year before, the first such rise since the two countries’ tariff war flared last year.
“US trade data released Wednesday showed that the 2.1m tonnes of soyabeans the US shipped to China in February was 5,900 more than in February 2018. The last time exports rose on an annual basis was in May 2018, the data showed.
“Soyabeans were traditionally the largest US agricultural export to China, with sales of more than 30m tonnes per year. The shipments dropped to 8.3m tonnes in 2018 after China imposed a 25 per cent tariff last July.”
Meanwhile, a recent report from USDA’s Foreign Agricultural Service (“Brazil- Oilseeds and Products Annual“) stated that, “Post forecasts that Brazil will maintain its position as an oilseed production powerhouse in the 2019/20 marketing year. Soybean planted area is forecast to rise only modestly, but with yields recovering from the current drought, production should top records once again with 124 million metric tons (mmt) in the hopper.”
The report stated that, “Soybean exports in 2019/20 are forecast at 75 mmt, almost nine percent higher than in the current MY. However, exports will remain below the 84.15 mmt that Brazil shipped in 2017/18.
The previous MY was an extraordinary one for Brazilian soybean producers, who saw Chinese demand grow by more than 20 percent to hit close to 70 mmt (of the total 84 mmt sold), up from 54 mmt in soybean purchases madeduring 2016/17 MY. China’s imports from Brazil were driven by artificially inflated demand in the wake of U.S.-China trade tensions and the subsequent 25 percent punitive tariffs that Beijing imposed on purchases of U.S. soybeans.
“The export forecast for 2019/20 is based primarily on anticipation of a return to typical soybean sourcing patterns by China, which is Brazil’s largest soybean customer. Excluding the previous season, China imported about 75 percent of Brazilian soybeans in recent years. For comparison, in 2017/18, China purchased 85 percent of the total volume of soybeans that Brazil exported.
“If current trade tensions with the United States are resolved, the local market expects that demand from China will also subside from the peak reached last year, and perhaps even fall below the 75 percent of total volume sourced seen in recent years. Post contacts indicate that the Brazilian industry is watching closely the exact terms of the potential U.S.-China trade deal, including if stipulated volumes of certain commodities are purchased. In addition, it should be noted that the majority of Post contacts expect China’s overall soybean demand expansion rate to remain subdued in the next several years. In otherwords, instead of five percent annual increase in Chinese soybean demand, expansion may be closer to three percent.”