Naysayers note progress isn't as robust as report says using actual shipment info
The U.S. government said Friday that China had purchased $23.6 billion in American farm products this year, but that amount includes both goods that have been shipped and also those sold but not yet exported. Some observers note the figure is an “overly optimistic” gauge as some of the sales may only ship after the Dec. 31 deadline and the contracts may still be canceled or postponed.
In the U.S./China Phase 1 agreement signed Jan. 15 and implemented beginning Feb. 14, China committed to making structural changes — including streamlining its regulatory processes and providing new and expanded market access to U.S. products “that are translating into new opportunities for American farmers and food manufacturers,” a Trump administration report stated. Follow this link to access the interim report from USDA and the Office of the U.S. Trade Representative (USTR) updating the status of the Phase 1 Agreement.
To date, China has implemented 50 of the 57 commitments that have specific deadlines under Chapter Three of the Phase 1 Agreement, the report said.
There has been considerable contact between the U.S. and China, including that teams from USTR, USDA, the Food and Drug Administration, and the National Oceanic and Atmospheric Administration interact on a regular basis with their counterparts in China, ensuring that China follows through on making fundamental changes that will benefit U.S. agriculture.
“These changes affect the entire range of agriculture products, including corn, soybeans, dairy products, poultry, pork, beef, horticultural products, pet food, and animal feed,” the report said. “The result is an historic expansion in the ability of our farmers and ranchers to sell their products to China. Before the Phase 1 Agreement, only approximately 1,500 facilities in the U.S. could export agricultural goods to China. Today, that number has increased to more than 4,000 facilities.”
Some key changes:
• Lifting the ban on imports of U.S. poultry meat, including pet food containing poultry products.
• Lifting the ban on imports of beef and beef products from animals over 30 months of age and removing all references to age restrictions on China’s internal list of beef products eligible for import.
• Signing protocols that allow the importation of U.S. horticultural products, including fresh chipping potatoes, California nectarines, California Hass avocados, and blueberries.
• Allowing imports of U.S. barley for processing, along with the forage products Timothy hay, alfalfa hay pellets and cubes, and almond meal pellets and cubes.
• Lifting restrictions on imports of U.S. pet food containing ruminant material.
• Updating an approved list of U.S. seafood species that can be exported to China.
• Expanding China’s internal list of U.S. beef and pork products eligible to enter its ports, including processed meat products.
• Publishing a new domestic standard for dairy permeate powder for human consumption that will allow imports of this product from the U.S., recognizing the U.S. system of oversight for dairy food safety, allowing importation of U.S. ultrafiltered, fortified, and extended shelf life milk, and streamlining registration requirements for U.S. dairy and infant formula facilities.
• Signing a regionalization agreement that, in the event of a detection of highly pathogenic avian influenza or virulent Newcastle disease in a particular region of the United States, will allow U.S. poultry meat exports from unaffected regions of the country to continue.
Key gains by commodity as a result of Phase 1:
U.S. poultry farmers “have capitalized on the new opportunities opened up for them,” the report noted. “In the first eight months of this year, U.S. poultry farmers had exported nearly $436 million in poultry meat to China. At the current pace, we expect a record year for poultry meat exports to China.”
Dairy has seen positive results from the deal, as prior to the Phase 1 agreement, Chinese restrictions limited U.S. dairy potential in the market. “China now recognizes the U.S. food safety system of oversight for dairy products, giving U.S. dairy and infant formula companies increased access to China while also providing Chinese consumers with a wider variety of high quality and safe U.S. products,” the report said. “As a result, exports of U.S. dairy products to China were already up 38% from January through August 2020 compared to the same period in 2019, and are expected to continue to rise.”
China’s purchases to date:
Besides official U.S. export data and Chinese import data, which are updated on a monthly basis with data now available through August 2020, the report noted that USDA’s Export Sales Reporting Program (ESR) offers further insight on recent purchases of agricultural commodities.
How did they calculate the figures? “Looking at simple import or export numbers alone is misleading because actual sales oftentimes lag exports by several months,” the report said. “What we have done is combine actual export numbers with the sales indicated in the U.S. Department of Agriculture (USDA) weekly Export Sales Reports (adjusting to eliminate any double counting) then, since the weekly sales reports only cover approximately 80% of U.S. agriculture sales, we have proportionally adjusted upward to cover products not included in the weekly reports. This methodology has proven accurate and corresponds with the similar numbers China keeps.”
All ESR weekly sales and export data is reported in volume and has been converted to value in this Interim Report using current and historic market prices. “Export Sales Reporting indicates that, as of Oct. 8, 2020, outstanding sales this year far exceed the number reported in the same period in 2017, which is the year used to determine ‘baseline’ sales for purposes of the Phase 1 Agreement,” the report said. “Outstanding sales of corn to China are 8.7 million tons, an all-time high, while outstanding sales of soybeans to China stand at 17.4 million tons, double 2017 levels.”
Soybeans: U.S. soybean exports to China have averaged over 1.1 million tons per week since the beginning of September, according to ESR data. “Sales are near record highs, with exporters reporting nearly 15.0 million tons in sales of U.S. soybeans to China since early August, valued near $6.2 billion at current prices,” the report stated. “Much of these sales will be exported before the end of the year with the balance exported during the first half of 2021.”
Corn: “Corn sales to China are also at an all-time record,” the report said, referencing that during the week of July 30, U.S. corn exporters sold 1.94 million metric tons of corn to China, the largest daily sales total to China ever, and the third largest single U.S. corn sale on record. “As of Oct. 8, 2020, total accumulated corn sales for 2020 are more than 12 times greater than those accumulated by the same date in 2017,” the report said.
Sorghum: U.S. sorghum exports for January-August are at $617 million versus $561 million for the same period in 2017. “China has purchased nearly all available old crop U.S. supplies,” the report observed. “New crop sales to China remain strong.” As of Oct. 8, 2020, total accumulated sorghum sales for 2020 are more than twice those accumulated by the same date in 2017.
Pork: U.S. pork exports to China are “breaking records,” the report noted, detailing that U.S. pork and pork product exports to China stand at over $1.5 billion from January through August 2020 and, as reported to USDA, China continues to buy U.S. pork at strong levels.” As of Oct. 8, 2020, total accumulated pork sales to China in 2020 are eight times greater than those accumulated by the same date in 2017.
Beef: Removal of barriers to U.S. beef has meant “U.S. beef and beef products to China through August are up 118% compared to the same period in 2019 and are already more than triple the total for U.S. beef exports to China in all of 2017.” As of Oct. 8, 2020, total accumulated beef sales to China in 2020 were over 25 times greater than those accumulated over the same period in 2017.
Fruits, vegetables and specialty crops: U.S. pecan exports to China totaled $23 million from January through August 2020, which represented an 84% increase from the same period last year. Pecan exports are on track to beat the previous annual record by the end of the year. U.S. peanut exports to China totaled over $168 million from January through August 2020, compared to just $30 million during the same period in 2017.
Animal feed and pet food: U.S. alfalfa hay exports to China totaled $270 million from January through August 2020, up from $236 million during the same period in 2017, the report said, “and are on track to beat the previous annual record by the end of the year.” U.S. pet food exports to China totaled over $20 million by the end of August, which the report said is a doubling of the previous annual record.” With provisions in the Phase 1 agreement, the report noted the Chinese market for U.S. pet food could reach $300 million or more annually.
As with almost anything from the Trump administration, the report conclusions are being challenged by some, especially from some analysts who earlier this year thought there was no way even the ag purchase tally would come close to the $36.5 billion purchase commitment for the first year of the accord ($43.5 billion for the second year, for an average of $40 billion over two years and up from $24 billion in 2017, the year before the trade war started).
Naysayers note that the text of the deal (link) calls for product to be purchased and imported into China in 2020, adding that some of the contracts may still be canceled or postponed. And, if travel time is considered — as much as a month to six weeks from parts of the U.S. to China — that may also rule out most of the December shipments.
As the report notes, the figures in the assessment report are a combination of actual export data for the January-August period and ESR data that provides some perspective on the purchases and exports that have taken place since August. By doing so, that does at least provide a more up-to-date look at implementation of the agreement. “Looking at simple import or export numbers alone is misleading because actual sales oftentimes lag exports by several months,” the USTR acknowledged “This methodology has proven accurate and corresponds with the similar numbers China keeps.”
An important statement in the report is that, “It is still to be seen whether they meet their target but particularly given the Covid-19 effects on the global economy they are making substantial progress.”
Another key is what U.S. trade sources have signaled over the last several months — the Phase 1 Agreement did not go into effect until Feb.14, 2020, and March is the first full month of its effect. “That means that we have seen seven months of agreement sales,” the report stated.
Further, the agreement provisions covering various trade impediments that have existed are a key factor in the level of sales and export activity relative to U.S. goods to China. Without those changes, the level of Chinese purchases of various commodities would not have been possible, particularly for things like pork and beef.
As for the future, the report concludes: “All indications are that the substantial increases in China’s agricultural purchases will continue and benefits will redound for years, if not decades, as U.S. farmers and ranchers continue to build strong connections with China’s consumers who can see for themselves that U.S. agricultural products are unmatched in quality and affordability.”