Phase 1 agreement with China helps restore agricultural export trade flows to the once-preferred destination for U.S. commodities, according to a panel who made a presentation at the Commodity Futures Trading Commission meeting. Advisory Marketing on June 9.
During a panel discussion offering perspectives on the pandemic, the recovery and the significance, David Rossen, global head of cotton cover at Louis Dreyfus, said the trade war and tariffs had created a situation in which China turned to other grain suppliers from South America or the Black Sea. , and US export values and overall volumes fell.
China has started to shift its buying habits towards the United States, which is significantly reflected in increased trade flows and rising prices.
“I think the overriding expected benefit attributed to the Phase 1 trade agreement has been achieved where we have seen significant volumes increase in Chinese demand and US agricultural products,” Rossen said.
According to data released on June 9 by the US Meat Export Federation, beef exports to China continued to soar in April, reaching a record 17,233 t (down from just 1,367 t a year ago). The value of exports to China was $ 130.6 million, compared to $ 11.5 million.
While China / Hong Kong remains the main destination for US pork, January-April exports to the region fell 23% from a year ago to 318,780 tonnes, valued at 725.8 million. dollars, reports the USMEF. China / Hong Kong accounted for nearly 35% of US pork export volume last year, but until April, the 2021 ratio fell to 30%.
Dhamu Thamodaran, a retired commodity coverage manager for Smithfield Foods, said when the trade war started in 2018, China hit back with a 50% tariff on pork. This cost was largely borne by American producers, as European producers could gain additional access to the Chinese market with better price competitiveness. The Phase 1 agreement lowered the tariff on pork from 50% to 25%.
China produces half of the world’s pork and consumes more than half of the world’s pork, but after facing the decimation of its national herd due to African swine fever, the country has had to purchase record amounts of pork to respond to domestic demand. This led to a record of pork purchases in the United States, despite the tariffs.
Export demand analysis
Thamodaran says that with or without a trade deal, China’s pork purchase will likely continue for two to three years before China recovers its livestock supply. If the tariffs can fall further, it will continue to benefit US producers who have suffered losses of $ 800 million because of the tariffs.
During her speech at the World Pork Expo, President of the National Pork Producers Council Jen Sorenson said removing China’s punitive tariffs on American pork remains a top priority.
“As China continues to fight African swine fever and US pork exports have increased, these tariffs put the US pork industry at a great disadvantage as the world’s largest pork consuming country seeks sources reliable pork, ”Sorenson said.
Christian Edmiston, director of sourcing and risk management at Land O’Lakes, also shares that China has dramatically increased its use of whey protein, a byproduct of cheese production, in food rations for local people. pigs.
The American dairy industry exports the equivalent of 15 to 20% of its annual production. China is the world’s largest importer of dairy products, which makes the relationship with the United States paramount.
“When the trade war started and tariffs were put in place, that obviously contributed to what was already a relatively low price scenario,” Edmiston said.
As Chinese demand increased here for at least six to twelve months and sometimes opened faster than that in the United States, it created a major driver of export demand for American dairy products. “It has certainly been of great help to American dairy farmers,” he adds.