Covid-19, ‘this global tragedy,’ flattens U.S. ag exports
Throttled by pandemic, U.S. farm exports this year will barely exceed last year’s totals, wiping out hopes of a speedy recovery from trade-war losses, said the USDA. Sales to China are rising but slower than projected when the Phase One trade agreement with Beijing took effect in February and far from the tripling necessary to satisfy the purchase levels specified in the pact.
“The COVID-19 outbreak has created a shock to world economies that will cause an unusually high level of uncertainty for the foreseeable future,” said USDA economists in a quarterly forecast of agricultural exports on Friday. World growth will decline 5.5% on a per capita basis under the weight of “this global tragedy” that is damaging both productive capacity and buying power, they said.
U.S. farm exports were forecast at $136.5 billion this fiscal year, which ends September 30, only $1 billion higher than fiscal 2019, when the trade war bit deeply into sales. They were $143.4 billion in fiscal 2018. Cotton exports are forecast to run $1 billion below 2019’s totals, with corn down nearly $1 billion and soybeans down more than $400 million. But pork exports would be $1.4 billion higher and beef up $1.3 billion.
“China has been sourcing record volumes of soybeans from Brazil, aided by the weak Brazilian real,” said the USDA. It pegged U.S. sales to China at $13 billion this fiscal year, compared to its February estimate of $14 billion. In 2019, sales totaled $10 billion. Before the trade war, China was the leading destination for U.S. ag exports and sales averaged $21 billion annually.
Phase One calls for China to buy $36.5 billion of U.S. food, agricultural, and seafood products during calendar 2020. A broad range of U.S. analysts are skeptical that goal will be met, considering the slow pace of sales. China prefers to buy U.S. crops at harvesttime during the fall, when prices are lowest.
“It was already going to be a herculean task to make Phase One, and we haven’t made what I would consider even the seasonal progress needed to meet the agreement,” said Seth Meyer of the FAPRI think tank at University of Missouri. “Prospects for full implementation in 2020 already looked pretty dim” before the recent chill in Sino-U.S. relations, he said.
President Trump assailed Chinese policies on Friday and said the U.S. would withdraw trade concessions to Hong Kong because of Chinese muzzling of democracy in the former British colony. But he did not mention the Phase One agreement, one of his leading trade achievements.
Despite the coronavirus slowdown around the world, sales of U.S. ag exports to Canada and Mexico, the top two customers, were forecast to rise from fiscal 2019. Canadian purchases would climb 1% and sales to Mexico 4% “as stronger exports of poultry, pork, and dairy more than offset lower corn and cotton shipments,” said the USDA. Sales to Japan, the No. 4 market, and South Korea, the No. 5 market, would hold steady. Sales to the EU would fall by $1.1 billion.
“All things considered, ag trade is holding up a lot better than many might expect with all of the COVID-19-related problems,” said Joe Glauber, former USDA chief economist.
Exports generate roughly 20¢ of every $1 in farm income and are one of the few sectors of the U.S. economy to consistently run a positive balance of trade. Imports are forecast at $130.2 billion this year, down marginally from fiscal 2019, for a balance of trade of $6.3 billion in the United States’ favor.
Private exporters reported the sale of 396,000 tonnes of U.S.-grown soybeans worth $122 million to China last week.