China nears 75% of U.S. Ag Imports for First Year of Phase One Deal
February 9, 2021
Ames, Iowa – With just about one week left in the first year of the phase one trade deal, an Iowa State University study estimates that China has reached almost 75% of its obligated U.S. agricultural imports.
“Whether China can meet the target by February 15 depends largely on the on-time delivery of the advanced corn and soybean orders,” said Wendong Zhang. “China has ordered large amounts of corn and soybean for delivery for the rest of the 2020/21 marketing year, which ends on August 30, 2021. The exports are not official until transported to China, so whether China can meet the first-year goal depends largely on logistics,” he said.
Zhang is an assistant professor of economics at the Center for Agricultural and Rural Development at Iowa State University. He and his Iowa State colleagues Dermot Hayes and Xi He are the authors of “China’s Agricultural Imports under the Phase One Deal: Is Success Possible?”
Since they first authored the report in May, Hayes, Zhang, and He have continually updated their estimates of China’s U.S. agricultural imports under the phase one deal. The previous update, released in November, showed China had secured 52.2% of its obligated imports. The most recent update puts that number at 74.8%.
In November, the researchers noted that China made significant purchases of U.S. agricultural products in August and September, especially soybeans. And, while they say corn and meat products have been the focus of China’s recent purchases, it is likely they will still import a significantly larger amount of soybeans as they push toward the phase one goals.
“Soybeans accounted for 58% of China’s U.S. agricultural purchases in 2017 and only accounted for around 41% in the 2020 calendar year,” Zhang said. “In addition, the United States’ major competitor, Brazil, is experiencing drought and a late soybean harvest, which increases room for U.S. soybean purchases,” he said.
While Hayes said that the United States could choose to terminate the second year of the trade deal, he doesn’t think that’s likely, given the regulatory changes China is making to meet the agreement and the importance of China’s purchase commitments to U.S. agriculture. “Given the importance of healthy U.S.-China trade relations to U.S. farmers and China’s efforts in meeting its purchase targets, at least in the agricultural sector, it’s beneficial for both sides to continue to implement the deal,” he said.
Zhang said that the second year of the trade deal will more than likely be similar to the first year for U.S. agricultural producers. “China’s feed and meat demands are increasing due to rebuilding its hog herd,” he said. An outbreak of African swine fever in 2018 decimated China’s hog industry. “This pattern is very likely to continue in the second year of the trade deal.”