USDA expects sunny outcome for ag exports to China

The U.S. Department of Agriculture on Tuesday attempted to assure American farmers that a recently negotiated trade deal between the U.S. and China is starting to make headway.

“President Trump and this Administration negotiated a strong trade agreement with China that promises significant benefits for American agriculture,” Agriculture Secretary Sonny Perdue said in a press release. “We look forward to realizing these benefits this year and are encouraged by progress made last week. We fully expect compliance with all elements of the deal.”

The president signed the Phase One Economic and Trade Agreement with his counterparts from China in Washington on Jan. 15.

The deal promised significant trade benefits to U.S. agricultural product exporters through $50 billion in purchases by China this year. American farm goods were heavily tariffed by the Chinese government in retaliation for U.S. tariffs levied on myriad Chinese product imports over the past two years.

The Chinese government recently signed a protocol for importing fresh potatoes from the U.S.; lifted the ban on U.S. poultry products and restrictions on pet food containing ruminant ingredients; updated its list of U.S. facilities approved to export animal protein, pet food, dairy, infant formula, tallow and feed additives; and updated its list of U.S. seafood types approved for export to China.

However, the coronavirus outbreak has had a negative impact on China’s agriculture goods trade in recent weeks.

“With the longer [Chinese New Year] holiday, and workers stuck at home, there has not been enough labor available in processing plants and slaughterhouses, and livestock and poultry could not be slaughtered and restocked in time. There also are no more available plugins at Shanghai and Tianjin seaport, and reefers cannot be transported to cold stores and discharged into cold stores,” said the Stone Mountain, Georgia-based USA Poultry & Egg Export Council in a statement.

“Currently, [Chinese] importers have started shifting their purchase to South American suppliers, but with improved crush margin in recent weeks, nearby Pacific Northwest (PNW) shipments would be attractive,” wrote Zhang Xiaoping, the U.S. Soybean Export Council’s regional director for China, in a recent statement. “The problem, however, for most importers is lack of Tariff Exemption Quota (TEQ), without which trade is impossible as a retaliatory tariff of 27.5% is still in place.”

Once the Chinese government establishes a new TEQ, “U.S. soy may see a recovery increase in demand in early summer after the epidemic is gone,” he added. “China can still import a total of approximately 90 million metric tons (MMT) of soybeans, of which 36-40 MMT could be from the U.S. in the 2020 calendar year to fulfill its commitments in the Phase One deal.”