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Column: Checking up on China’s U.S. ag commitments in wake of Phase 1 deal

FORT COLLINS, Colo. (Reuters) - Agriculture market-watchers have been somewhat skeptical about the feasibility of the Phase 1 trade deal the United States signed with China back in January, which suggested that U.S. farm product exports to China in 2020 would exceed 2017 levels in value by 50%.

A man uses his phone above an electronic board showing the CBOT soybean futures (above) on a pedestrian overpass at Lujiazui financial district in Shanghai, China May 16, 2019. REUTERS/Aly Song

However, China has stepped up U.S. agricultural purchases in recent weeks, perhaps in an “under the radar” way, since the purchases have not involved eye-popping volumes or many big-ticket items as might be expected with such a lofty target.

Soybeans are one of those big-ticket items, as they account for about half of the annual exported value of U.S. farm goods to China in a normal year.

China still has a long way to go on the purchases if the terms of the deal are to be met. But the recent progress is an improvement from the first couple months of the year, and that is despite the global market shock caused by the coronavirus pandemic.

On Thursday, some analysts worried the Phase 1 deal could be jeopardized as rumors swirled that U.S. President Donald Trump was mulling retaliatory action against China for perceived shortfalls in its handling of the virus outbreak. Nothing was confirmed as of Thursday afternoon, but sanctions, new tariffs or trade restrictions were all reportedly being considered.


China does not typically make large purchases of U.S. soybeans at this time of year when Brazil is the main supplier. But in the week ended April 23, the Asian country booked 618,099 tonnes of old-crop U.S. soybeans, its largest weekly purchase since December and its largest on record for the month of April.

Chinese buyers were at it again on Thursday as traders reported that at least five U.S. bean cargoes, totaling at least 300,000 tonnes, were booked for shipment in August and September. The total may have been higher since traders said buyers were seeking at least eight to 10 cargoes on Thursday.

But that follows several weeks of relatively dismal sales. Through mid-April, China had bought only about 1 million tonnes of U.S. beans in the three months since the Phase 1 deal was signed. Combined exports to China in February and March may have been the lightest for the period since 1999.

The latest moves are encouraging, but China has a long way to go. Through April 23, it had 13.25 million tonnes of U.S. soybeans on the books for delivery in 2019-20, though some 9.6 million were shipped between September and December.

China typically starts buying U.S. soybeans en masse around August, just before harvest. It has just one cargo booked for 2020-21 so far, but some analysts have estimated that China would need to import 40 million tonnes or more of U.S. beans in 2020 to be on pace with Phase 1.


In the week ended April 23, China bought 422,378 running bales of U.S. cotton for delivery in 2019-20, its largest weekly purchase for a current marketing year since June 2012. China cancelled most of that June 2012 purchase two weeks later, so excluding that, the latest deal was the biggest since November 2011.

Through April 23, China had booked 2.5 million running bales of U.S. cotton for the current marketing year, the most for the date since 2014, but well off the levels of the few years prior.

Net U.S. sorghum sales to China totaled 318,747 tonnes in the week ended April 23, the largest weekly total since December 2017. But cumulative 2019-20 bookings of 2.12 million tonnes is substantially lower than pre-trade war levels.

There were ideas last week that China may be prepping to buy 20 million tonnes of U.S. corn for state reserves, but there is still no evidence of it. China had 881,081 tonnes of U.S. corn on the books for 2019-20 as of April 23, which is the most for the date since 2014, but well off what many had hoped Phase 1 would entail.

U.S. wheat sales to China are nothing terribly special, either, at just 449,063 tonnes for 2019-20 through last Thursday. The new marketing year will begin on June 1, and China has already claimed 455,000 tonnes of the new crop, which is a lot for this early in the game.

China has also secured a half-million tonnes of the upcoming U.S. corn harvest, the largest new-crop booking for the date since 2013.


China has been seeking more U.S. pork for most of the last year due to the African swine fever outbreak sharply reducing Chinese pork production. However, the United States is running into shortages of its own as the coronavirus has recently caused many plants to close or operate at reduced capacity, so it is uncertain how this may affect U.S. exports in the coming weeks or even months.

But April sales have been big. China bought 35,138 tonnes of U.S. pork in the week ended April 23, its second-largest weekly purchase in 2020 and the fourth-largest in records back to 2013. Through April 23, China had booked 424,301 tonnes of U.S. pork for delivery in 2020.

U.S. pork and product exports to China reached a record high 574,988 tonnes in 2019, some 69% of which was shipped in the second half of the year. The average export price of that pork to China in the latter half of 2019 was $2,358 per tonne.

China has also been in the market for U.S. beef. In order to comply with the Phase 1 deal, Beijing in February lifted a ban on beef and beef products from U.S. cows more than 30 months old, provided they meet certain inspection and quarantine requirements.

China’s U.S. beef purchase of 1,489 tonnes in the week ended April 9 was the largest in modern records, and that followed with sales of 1,439 tonnes and 1,048 tonnes in the subsequent two weeks. China first lifted a 14-year ban on U.S. beef in 2017, allowing imports of deboned and boned beef from American cows under 30 months old.

In February, the unit value of U.S. beef and beef product exports to all destinations averaged $6,079 per tonne.

Beijing also cleared U.S. poultry meat for import late last year after the January 2015 ban over avian flu. Poultry is not included in USDA’s weekly export sales report, but January and February exports to China were substantially larger than in any other month since the ban - evidence China has returned to that market.

The opinions expressed here are those of the author, a market analyst for Reuters.

Editing by Matthew Lewis