China has stepped up U.S. corn and soybean purchases in recent weeks, but could cancel those orders if it later finds a better price
NEW YORK – Seven months after the United States and China signed a preliminary agreement to end their trade war, Beijing’s purchases of American agricultural products have still reached the goal of the deal.
As President Donald Trump readies for a fierce reelection battle in November, US media reported that the two sides are set to meet in early August 15 to discuss the deal, prompting China to buy US goods and services this year and next will increase sharply.
But according to data compiled by the Peterson Institute for International Economics (PIIE), Chinese agricultural purchases at the end of June were far from where they should be at this point in the year.
They had achieved only 39 percent of their semi-annual goal, according to U.S. figures, as 48 percent, based on Chinese figures.
“If we go back to what the level of trade was in 2017, we will be lucky,” said Chad Bown, a PIIE senior fellow who wrote the study, referring to the year before the trade war began.
– Pick up purchases –
Under the terms of the deal, China agreed to increase $ 32 billion in agricultural imports over the next two years from 2017 levels.
Chinese orders for corn and soybeans have increased since mid-July, with Beijing buying just over three million tons of U.S. oilseeds between July 14 and August 7, according to data from the U.S. Department of Agriculture.
At the end of July, the United States reported the largest ever daily order by China for its corn, of 1.9 million tons.
The announcements were a relief to U.S. farmers, who are expecting a bumper crop this year and need to find buyers to take it.
They also came at a time of high political tension between the two countries, after the Trump administration authorized sanctions against several Hong Kong leaders over the lawsuit in the city, and restrictions on Chinese apps WeChat and TikTok.
The Chinese “realize that we are not the best of friends at the moment, but they need the products and they will take as much as they need,” said Jack Scoville, agricultural market analyst for Price Futures Group.
It is possible that Beijing will change its mandates from purchasing this harvest this year to next year.
But analysts warn that any orders could be called before the ships carrying their carriage leave port.
Brazil and Argentina, two of the world’s largest producers of soybean and corn products, will begin harvesting next spring, said Brian Hoops, president of brokerage firm Midwest Market Solutions.
China “was able to cancel all these purchases they made in July and buy at much cheaper prices than that available to them,” Hoops said.
– ‘Infeasible’ –
The trade deal was called “phase one” and signed in January has managed to survive both the tensions and the sharp global economic downturn caused by the coronavirus pandemic, which has hit international trade hard.
U.S. Trade Representative Robert Lighthizer said in June that China would abide by its promises, while Washington would also pursue a “phase two” trade treaty that would address issues of overcapacity, subsidy, disciplines over China’s businesses in the state, and cyber theft. . “
Bown said any success in getting China to buy not only farm but also energy and manufactured goods would help Trump in his reelection campaign.
“$ 200 billion is a big round number he can go out and talk about,” Bown said, referring to the amount China had promised to buy by the end of 2021.
But China has lifted quite a few of the tariffs it applies to American products during the trade war, making that goal “unattainable.”
“There is no economic incentive for the Chinese private sector to buy American. So if China actually buys these goods, it has to be through state law,” Bown said.
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