Stronger-Than-Expected Sales to China Buoy U.S. Ag Exports
The China-U.S. trade war cut deeply into U.S. farm exports to China, but not as far as initially estimated, said the Department of Agriculture on Monday. The agency forecasted $139 billion in agriculture exports, the largest amount in three years and up 3% from 2019. A key reason for the brighter outlook this year is an upturn in pork and soybean sales to China.
“Export sales of both are ahead of the same time last year,” said the USDA in a quarterly forecast of exports. “Additional sales to China since the beginning of the fiscal year has also strengthened U.S. prices,” said USDA analysts, referring to soybeans. “Pork is up $400 million primarily as demand from China boosts volumes.”
China was forecast to import $11 billion of U.S. farm goods in the fiscal year that began on October 1, up from $10 billion in fiscal 2019. Both of those figures were larger than the previous USDA forecast, in August, of $7.3 billion in 2019 and $7.5 billion this year. Even so, sales to China would run at roughly half of the $21 billion annual average before the trade war took effect. Once the top market for U.S. agriculture exports, China now ranks fourth.
The USDA said soybean exports would rise by $2 billion, pork by $1.2 billion, and horticultural products by $500 million, to account for most of the increase in sales from fiscal 2019. It increased its tally for 2019 to $135.5 billion, up $1 billion, partly to reflect the large sales flow to China.
Negotiations over a “phase one” agreement between China and the United States are taking longer than expected. China announced on Monday that it would increase its penalties from intellectual property theft, addressing one of the U.S. goals for resolution of the trade war, reported Bloomberg. President Trump says China would buy up to $50 billion of U.S. farm goods in two years as part of “phase one,” but the purchases have become an issue for negotiators.
China-based Global Times newspaper reported “the two sides are still moving closer to agreeing on a phase-one trade agreement with broad consensus having been reached, despite differences over the scale of tariff removals, according to Chinese experts close to the government.”
While exports to China are up, the outlook for other major export markets is stable or lower. Canada and Mexico, the top two customers, are unchanged at a combined $41.3 billion. Sales to Japan, the No. 3 market, are forecast for $12.5 billion, down by $300 million due to “reduced prospects for corn, pork, and beef,” and South Korea is forecast at $8.3 billion, down by $200 million “as a result of lower beef unit value.” Exports to the European Union were pegged at $13.3 billion due to lower demand for soybean and soy products.
USDA analysts say economic growth will slow in fiscal 2020, both domestically and globally.
The report, “Outlook for U.S. Agricultural Trade,” is available here.