Early Signs that Trade is Coming Back

The U.S. “Phase 1” trade deal with China is still in its infancy, and now it’s time for the infant’s six-month check-up.

Signed last January, the deal commits China to $80 billion in ag purchases from the U.S. during 2020 and 2021. As of June, agricultural exports to China hadn’t grown as much as we’d hoped. Trade watchers were getting concerned.

Large new-crop sales are a good sign for the next marketing year.

Now, three months later, the China agreement seems to be working as we are seeing a growth spurt. Sales of new-crop corn, soybeans, sorghum and cotton to China are up—not as much as they need to be in order for China to meet its Phase 1 commitment, but enough to give us hope that we might see China catch up in the next few months.

For corn, new-crop sales to China stand at 225.2 million bushels, compared to 172.5 million bushels at this point in 2019. For soybeans, new-crop sales are at 377.4 million bushels, more than double the 164.2 million bushels a year ago. Sorghum sales to China are at 38.1 million bushels, compared to zero at this point last year. And new-crop cotton is at 2.2 million running bales, again, compared to zero a year ago. And those numbers don’t include sales that are destinated for unknown locations, which most likely include China.

These numbers are far behind pre-trade war exports, and they’re still behind where they need to be if China is going to reach the goal of about $36 billion in agricultural imports from the U.S. this year. But the year isn’t over yet, and China needs to import a lot of commodities to feed its factories, animals and people.

It’s not really that surprising that exports would be slow to grow. Economic growth has been stunted around the world because of COVID-19. If you take COVID-19 out of the equation (and don’t we all hope to put the virus in our rearview mirror soon), perhaps 2021 will exceed expectations where 2020 has lagged. Large new-crop sales are a good sign for the next marketing year, so we like where this trend is heading.

Also on the trade front, the U.S. – Mexico – Canada Agreement officially took effect in July, promising an additional $2 billion in U.S. agricultural exports to Mexico and Canada.

This was the first renegotiation in my memory of an existing trade agreement, and I like the precedent that it sets. Trade deals should not be set-it-and-forget-it arrangements. Over the decades since the North American Free Trade Agreement was implemented, biotechnology was widely adopted by farmers across the continent, bringing the need for updated commitments on reviewing and approving biotech crops. And, of course, after years with any trade deal the countries involved are bound to find some areas for improvement, such as the agreement reached with Canada on fairer dairy pricing.

A problem that grew nearly unchecked under NAFTA was seasonality of imports from Mexico, resulting in dumping of produce on the U.S. market just when U.S. producers needed to sell their crops. The Administration held hearings on the issue of seasonality last month, and now we hear that the Administration will initiative an investigation under section 201, the safeguard provisions, of the 1974 Trade Act. While this investigation is being initiated on blueberries from Mexico and other countries, this is just a down payment on addressing this longstanding seasonality problem that affects a wide range of produce. This is the beginning, not the end, of our work to ensure that surges of inexpensive imports don’t wipe out U.S. growers. The 201 investigation will take several months, but we’re thankful that the Administration is taking action.

This week’s announcement from the president of Taiwan that her country will lift restrictions on U.S. beef and pork is another reason to be hopeful. Taiwan has been overly restrictive concerning allowable ractopamine levels in pork and imports of cattle aged 30 months or older. Taiwan is making these changes in preparation for trade talks with the United States, a sign that the Administration’s recent success in completing trade deals has let other countries know that we want to strike deals and we are open for business.

U.S. agriculture has been watching for signs of hope, and these early indicators of a return to more-robust ag exports are giving us the hope we need. While the trade situation has been volatile in recent years, one thing hasn’t changed: U.S. farmers and ranchers are the most productive in the world. No one can beat us on quality, either. We’ve got the agricultural commodities the world needs, and under these new trade agreements we’re ready to bring trade back!