What trade war? US ag sales to China leap despite Trump's risky rhetoric

China's ag imports from US soaring while Aussie traders watch nervously

Agribusiness
US corn shipments to China have spiked so rapidly they threaten to exceed quota limits.

US corn shipments to China have spiked so rapidly they threaten to exceed quota limits.

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US farm exporters are enjoying a boom year, despite President Donald Trump's provocative blasts at Beijing

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While Australian exporters are working overtime to protect our $13 billion agricultural market in China from being buffeted by increasingly unpredictable trade winds, US farm exporters are sailing through a boom year, despite President Donald Trump's persistent provocative blasts at Beijing.

The volume of US beef bound for Chinese buyers in the first eight months of 2020 was more than double the tonnages shipped in the same period in 2019, topping 8500 tonnes.

That's well above the modest annual average of 3000t for US beef exports to China in the past five years.

Wheat sales have more than doubled this year, too, running about five times above their five-year average.

Barley shipments are also rising, dairy exports are up 20 per cent and the number of US agricultural processors with approval to export product to China has doubled to 3500.

In contrast, while Australia is still no slouch on the China export front, it has been a year of surprising challenges in our biggest offshore ag marketplace.

Our barley is basically off the menu in Beijing, several of our meat processors have been barred from the Chinese beef and lamb trade and other commodity sectors are nervous about what's next.

In August Chinese purchases of Australian beef sank to about 12,000t - down from 26,000t a year ago.

Feed grain fever

In the US, agriculture department officials expect the volume of American corn and sorghum exported to China in 2020 could hit its highest peak since 2012-14.

In fact, if Chinese demand for feed grain continues at current bullish levels, US barley and wheat sales are also likely to surge further as substitutes for corn shipments which have spiked so rapidly they threaten to exceed Chinese quota limits.

Agricultural trade analysts also expect China to buy a record 40 million tonnes of soybeans in 2020, or about 10pc more than previous records set in 2016.

All this rampant US trade activity comes despite the Chinese frequently being the focus of President Trump's strident criticisms on various fronts ranging from China's responsibility for coronavirus, to it undermining US manufacturing and technology jobs, breaching international law in the South China Sea and violating human rights in Hong Kong.

With the US election looming, he has also promised to create "made in America" tax credits and impose tariffs "on companies that desert America to create jobs in China", and prohibit federal contracts with firms outsourcing orders to China.

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While Australian officials have tried to avoid antagonising Beijing for fear of losing more trade traction this year, the US has managed to make a habit of keeping up the provocative rhetoric while also successfully securing Chinese orders for more American sales.

Last month China reiterated its commitment to a January trade agreement which supposedly ended a two-year trade war between the two and saw Beijing promise to import US agricultural goods worth $43.6b ($US32b) in 2020 - double its 2017 purchases.

Global food and water research manager with the Perth-based think tank Future Directions International, Mervyn Piesse, said while Beijing was unlikely to hit its import targets in 2020, it was buying far more farm commodities than before the two countries started their tariff wars.

African swine fever's destruction of half the Chinese pig herd, the worst Yantze Basin floods in 20 or 30 years, and a rundown in Chinese corn stocks had combined to create China's highest food price inflation in a decade.

Beijing can't risk the potential instability which might come with further food price shocks - Mervyn Piesse, Future Directions International

Mr Piesse said a fear of deteriorating food security meant China needed much more grain and meat and Beijing had fewer retaliation options to challenge any US presidential grandstanding or "meddling" in Chinese affairs.

"Beijing can't risk the potential instability which might come with further food price shocks," he said.

"Chinese consumers also like imported food from places like the US and Australia - it's generally considered safer or more trusted than Chinese-grown product."

He said it was remarkable the US was enjoying an export surge in a period of heightened political tension with China, which seemed to be growing worse.

Is China scared?

"It's quite possible China is scared of the US, or scared of following through with its own trade threats against America because nobody really knows what Donald Trump might do," he said.

Mervyn Piesse

Mervyn Piesse

"The downside is whenever China is displeased with international political attention which questions its own affairs it has a tendency to retaliate by targeting less powerful states, including Australia and Canada.

"Many countries have become collateral damage in the stand-off between these two economic powers."

Mr Piesse said the US not only wanted to cut its trade deficit with China, it wanted China to reform its trade, investment, social and legal laws to be more aligned with other members of the WTO.

Unfortunately, that hadn't transpired and it was an increasingly difficult point in relations between China and many western governments.

Although US farmers badly needed America's Chinese exports to revive, he said Trump may yet decide to scrap the latest trade deal with Beijing as a pre-election ploy, demanding even tougher trade concessions from Beijing.

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