“Dimmed” Hopes That China Will Double U.S. Farm Purchases, as Phase-One Deal Signing on Schedule

Lingling Wei reported in Friday’s Wall Street Journal that, “Chinese President Xi Jinping’s chief trade negotiator will travel to Washington early next week to sign a phase-one trade deal with the U.S., China’s Commerce Ministry said Thursday, the first official confirmation by Beijing on the signing of an agreement that could help ease bilateral tensions.

“The Chinese delegation, to be led by Vice Premier Liu He, will visit Washington from Monday to Wednesday, Commerce Ministry spokesman Gao Feng said at a weekly briefing.

Days before a U.S.-China trade deal is due to be signed, large Chinese purchases of Brazilian soybeans and a pair of unexpected policy moves by Beijing have dimmed U.S. hopes that China would double its imports of American farm products this year.

Plume and Gu noted that, “But Chinese forward purchases of Brazilian soybeans, including about a dozen bulk vessels this week, or about 800,000 tonnes, are raising doubts Chinese buyers will have an appetite for vast supplies of U.S. soybeans once the deal is done.”

“China Buys Brazilian Soybeans Before Trade Deal With U.S.,” by Isis Almeida and Tatiana Freitas. Bloomberg News (January 8, 2020).

The Reuters article explained that, “Adding to U.S. concerns about the deal, sources in China told Reuters this week that Beijing has suspended its plan to implement a nationwide gasoline blend containing 10% ethanol this year. The plan had spurred hopes of a jump in U.S. exports of the biofuel to China, as well as shipments of U.S. corn to produce it domestically.

“The news that China’s ethanol demand would not be rising broke a day after Beijing said it would not raise a low-tariff grain import quota to accommodate greater U.S. exports.”

And David Reid reported on Friday at CNBC Online that, “A leading commodities expert at Goldman Sachs has raised doubts over China buying at least $40 billion worth of U.S. farming goods to satisfy terms of the ‘phase one’ trade deal.”

The CNBC update stated that, “Speaking to CNBC’s ‘Street Signs’ on Friday, Goldman’s Global Head of Commodities Research Jeff Currie said U.S. livestock and agricultural prices couldn’t yet factor in a coming boost to demand.

“For the report ending January 2, 2020, U.S. soybean accumulated exports (shipments) to China totaled 9.4 million tons and 9.7 million to the rest of the world. Outstanding sales were 1.7 million tons to China and 7.8 million to the rest of the world.” (Oilseeds: World Markets and Trade. USDA- Foreign Agricultural Service (January 2020).

“To suddenly reach an annual $40 billion figure as soon as this year, Currie said there would need to be a big increase in soybean exports — a tricky prospect given a swine fever outbreak that has reduced the number of pigs in China that are typically fattened up on soybeans.”

Source: Keith Good, Farm Policy News