China US ag. deals lag five-year average, USDA expects Q4 ramp up

Chinese purchases of key US agricultural goods are lagging historical trends, despite the country promising to ramp up purchases, USDA data showed this week, although it added it expected a sharp rise in purchases in Q4 to make up for the shortfall.

Chinese purchases of soybeans, wheat, corn and sorghum are all lagging five-year averages, a senior USDA economist told the International Grains Conference this week, but pointed out that exports of pork, beef and cotton have matched or exceeded the trend.

With China pledging to increase US farm good purchases to $40 billion a year for 2020 and 2021, the USDA said it expected a sharp rise in purchases over the next few months.

“The China agreement is over a calendar year agreement, so we would expect to see a number of purchases occurring in the fourth quarter of 2020,” said Robert Johansson, chief economist of the USDA’s Foreign Agricultural Service Division.

The news that China is lagging behind commitments will not come as a surprise to the market, amid conflicting reports about Chinese commitments to the deal amid rising political tensions.

The USDA said it was monitoring the deals closely.

According to Pieterson Institute of International Economics, China has, as of April, purchased $26 billion worth of US goods based on Chinese import figures, which translates into $20 billion if based on US exports.

Of that, agriculture accounts for $6.3 billion, well short of the $36.6 billion commitment for 2020.

In terms of future trade, Johansson said the USDA expected global agriculture trade to increase sharply over the next 10 years, with coarse grain exports (corn, sorghum and barley) set to rise by 37 million mt, or 17%, as diets continue to demand more protein.

Soybean trade is expected to expand by 36 million mt, up 24%, wheat 30 million mt, up 16%, and meat by 28% for poultry, 18% beef and 23% pork.