Column: U.S. soybeans drag down China's early Phase 1 progress - Reuters UK - 4 minutes read
Soybeans are harvested from a field on Hodgen Farm in Roachdale, Indiana, U.S. November 8, 2019. REUTERS/Bryan Woolston/File Photo
However, the oilseed occupied an unusually light share of total American farm exports to China during the first half of 2020, which explains why the Asian country is seemingly very far behind on fulfilling promises made in the Phase 1 trade agreement.
Between January and June, the United States had shipped $7.3 billion worth of agricultural and related products to China, according to data published on Wednesday by the U.S. Census Bureau. That is up 6% from the first half of last year, which was an 11-year low, but is down 25% from 2017, the benchmark outlined in Phase 1.
That trade deal, signed in January, suggested China in calendar year 2020 would purchase and import at least $36.5 billion worth of U.S. farm goods, some 50% more than in 2017.
The relationship between Washington and Beijing has been hot and cold in recent months, creating doubt over whether the trade deal is still on or is even a priority. But China has not given any indication it will intentionally fall short of its promises, though there may be an out if the coronavirus pandemic, for example, is deemed unforeseeable and prohibitive.
U.S. soybean exports to China in H1 2020 were valued at $1.36 billion, some 19% of the all-product total. That is their lowest H1 share since 1999, and it is well off the 10-year first-half average of 39%.
At 19%, soybeans are tied with pork and pork products as the most dominant U.S. agricultural good shipped to China in H1. But unlike soybeans, pork’s share is unusually large and replaces last year’s high of 5%.
Other U.S. farm goods with strong H1 exports to China include cotton, which accounted for 9% of the total, a seven-year high. Poultry and products accounted for 4%, its largest share in 11 years, and beef exports were record at $54 million.
By tonnage, H1 corn exports were 5-year highs and wheat 3-year highs, but despite the elevated activity for many products, the value of this year’s U.S. farm exports to China lags most previous years because of the lighter soy shipments.
BETTER LUCK AHEAD
Soybean exports to China usually surge in the last months of the year, and soybeans account for about half of the annual value of all farm goods sent to China. Therefore, it is fair to assume soybeans must do much of the heavy lifting if Phase 1 is to be satisfied.
July exports to China were only average at around half a million tonnes or slightly more, increasing the need for success in the last five months of the year. As of July 30, there were 2.9 million tonnes of soybeans left to ship to China before Sept. 1, so August could have a strong showing, though some of those sales will likely be rolled to the new year or cancelled.
China is off to a huge start for 2020-21 which begins on Sept. 1. As of a week ago, the top bean buyer had purchased 8.6 million tonnes, the most for the date since 2014, and it has bought at least 318,000 tonnes since.
The U.S. government sees domestic soy exports in 2020-21 rising 24% over 2019-20, largely on a strong return from China. It could be argued that the recently aggressive sales pace is necessary to meet that forecast, though some analysts think next year’s export target could eventually rise, especially if inventory in top supplier Brazil starts to dry up.
The opinions expressed here are those of the author, a market analyst for Reuters.
Source: Reuters
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