Chinese purchase of US soyabeans to reach over 40M tonnes/year from trade deal
January 24, 2020
China’s soyabean purchases from the USA as expected to reach over 40M tonnes/year as a result of the ‘phase-one’ trade agreement it signed on 15 January, Rabobank says.
“Soyabeans remain the focal point in US-China agricultural trading, due to the sheer size. As a result of the trade war and depressed demand due to African swine fever (ASF), China’s imports of US soybeans declined significantly, falling in the range of 15-20M metric tons and losing large shares to Brazil,” wrote grain and oilseed (G&O) analyst Lief Chiang.
“Over 2020 and 2021, the Chinese government is likely to design a mechanism to encourage crushers to purchase US beans over Brazilian ones. Possible policy measures might include, but will not be limited to, subsidies, using special import permits to restrict import origins, harsh inspections and quarantines on Brazilian beans, and, where necessary, direct state procurement. As a consequence, trade dispute risks with others partners might arise.”
China was also expected to buy more US corn at the expense of Ukrainian corn, and more US wheat at the expense of Canadian and Australian wheat.
In addition, China would be able to ramp up the import volume of sorghum and distillers dried grains (DDGS) feed materials rapidly in 2020 and 2021, depending on sufficient supplies and competitive prices.
As part of the 15 January agreement, China had agreed to buy an extra US$32bn of US agricultural products over a two-year period, with 2020 and 2021 imports to reach US$36.5bn and US$43.5bn, respectively, compared with US$24bn in 2017.
Chiang wrote that taking 2017 FOB prices as a reference. China’s import value of US G&O would reach US$19bn in 2020, achieving 52% of the trade target, and US$26bn in 2021, achieving roughly 60% of the target.
“This means China will have to buy large quantities of non-G&O agricultural products, such as meat, seafood, dairy, and cotton to make up the difference. To facilitate the high procurement, most of the existing retaliatory tariffs are expected to be removed soon.”
According to the BBC, although China and the USA had signed a ‘phase one’ deal, “the biggest hurdles are still to come and could stand in the way of a second phase agreement”.
Outstanding issues included Beijing’s ‘Made in China 2025’ programme designed to promote emerging technologies and government subsidies to state-owned enterprises.
Pressure would also continue on Chinese telecoms giant Huawei and other Chinese technology companies, the BBC said.