Ag expresses cautious optimism over China deal announcement
FARGO — China confirmed on Friday, Dec. 13, that it had reached a partial trade deal with the U.S., but many in agriculture could muster only cautious optimism as a reaction.
“We’re hopeful,” said Nancy Johnson, executive director of the North Dakota Soybean Growers Association. “That’s the biggest thing is that we’re hopeful that all of the details will be concluded and we would be able to move forward for the planning for next year.”
The U.S. Trade Representative’s Office announced “an historic and enforceable agreement” Friday that the U.S. and China had reached “an historic and enforceable agreement” which included “a commitment by China that it will make substantial additional purchases of U.S. goods and services in the coming years.” The U.S. agreed to modify its tariff actions based on the agreement. The United States will be maintaining 25% tariffs on approximately $250 billion of Chinese imports, along with 7.5% tariffs on approximately $120 billion of Chinese imports.
While the announcement seemed like a step forward, past news on the China trade front has been pulled back in days following, keeping many from putting too much stock in an announcement with few details. Still, it was viewed as a positive development.
“China went from the second-largest market for U.S. agricultural products to the fifth-largest since the trade war began,” American Farm Bureau Federation President Zippy Duvall said in a statement. “Reopening the door to trade with China and others is key to helping farmers and ranchers get back on their feet. Farmers would much rather farm for the marketplace and not have to rely on government trade aid, so today’s news is especially welcome.”
Soybean farmers in the Midwest have been especially hard hit, as China formerly was a major buyer of U.S. soybeans. North Dakota, for example, sent about 70% of its soybeans to the Pacific Northwest, bound for Asian markets and primarily China, prior to the trade war.
But the lack of details on the “substantial additional purchases” is what made Johnson hesitant to celebrate the announced deal. Earlier announcements indicated China would make $50 billion in ag purchases — far more than the country had ever purchased before in one year from the U.S. Johnson said there was no indication of what timeframe such purchases would be made or what kind of products would be involved.
Duvall’s statement held similar hesitancy.
“We are eager to learn the details of China’s commitment to purchase more agricultural products. American agriculture has been caught in the trade war crosshairs and it’s time to turn the page,” he said.
What would China buy?
China may be in the market for large purchases of pork, given the country’s battle with African swine fever outbreaks that have devastated their pig population.
And there are other products that could be involved as well. U.S. Wheat Associates and the National Association of Wheat Growers released a statement saying they are “encouraged” by the deal. China had imported as much as 1.65 million metric tons of U.S. wheat in marketing year 2016-17 and an additional 866,000 metric tons in 2017-18 before implementing retaliatory tariffs in March 2018. Earlier this year, China agreed to new policies related to new agricultural tariff rate quotas, including a 9.6 million metric ton reduced tariff tariff rate quota for wheat imports.
“We also believe that China’s flour millers and growing baking industry would welcome the opportunity to purchase high-quality U.S. wheat classes again,” the statement said.
Ag groups were hoping for more than just tariff relief.
“While tariffs grab most of the headlines, China’s unjustifiable non-tariff barriers and restrictions on science-based production technologies must be addressed so that Chinese consumers can enjoy the same high-quality, safe and sustainably-produced U.S. beef that Americans have enjoyed for decades,” Colin Woodall, National Cattlemen’s Beef Association CEO, said in a statement.
With so few details released yet, Johnson does not see a clear message indicating that North Dakota farmers should gear up for a big year for soybeans.
“Soybeans aren’t the only thing that the Chinese have purchased with us,” she said. “We simply do not see a lot of detail that would say ‘plan one way or another.’”
The other reason for caution, Johnson said, is that it’s not clear when the agreement could be in place.
“Typically these types of agreements take awhile to take effect,” she said.
North Dakota’s U.S. senators John Hoeven and Kevin Cramer cheered the news of the deal.
“Moving this phase-one trade deal forward with China is very important for our economy, especially for our farmers and ranchers, as it includes additional purchases of U.S. agriculture products as well as reduced tariffs,” Hoeven said in a statement.
“Today’s agreement includes China making significant purchases from United States producers, meaning the recent loss of business will hopefully prove to be a temporary setback, not a permanent loss of markets,” Cramer said in a statement.
Johnson, from the soybean group, said more news and details would create more certainty and allow for more excitement over the news.
“We would love to have it as a wonderful Christmas present,” she said.