China coronavirus: US agriculture secretary unsure if trade deal farm purchase agreement will be affected

Coronavirus has cast further doubt on China’s ability to buy US$36.5 billion of agricultural goods from the United States in 2020 as part of the phase one trade deal.
US Agriculture Secretary Sonny Perdue says the outbreak will have ‘ramifications economy-wide’, though stopped short of saying it would disrupt purchase goal

US-China trade war

Reuters

Published: 11:06am, 30 Jan, 2020

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US Agriculture Secretary Sonny Perdue said on Wednesday he does not know whether China’s coronavirus outbreak will upset Beijing’s pledge to radically increase purchases of American farm goods as part of the countries’ recent trade deal.

The virus has cast further doubt on China’s ability to buy US$36.5 billion of agricultural goods from the United States in 2020. Traders were already questioning the commitment as rival soybean supplier Brazil harvests a massive crop and a deadly pig disease curbs Chinese demand for soy used to feed livestock.

China, in the deal signed on January 15, promised to buy at least an additional US$12.5 billion worth of US farm products in 2020 and at least US$19.5 billion in 2021 over the 2017 level of US$24 billion.

But US futures prices have since dropped 5 per cent for soybeans and 8 per cent for pork as China, the world’s biggest soybean importer and pork consumer, has failed to make major purchases.

It obviously is going to have some ramifications economy-wide, which we hope will not inhibit the purchase goal that we have for this year

Sonny Perdue

Agricultural producers have grown worried China’s demand will temporarily suffer as the government has quarantined cities in a bid to contain the coronavirus. Delays or reductions in China’s planned purchases could put more pressure on US farm incomes that suffered during the countries’ bruising trade war.

“It obviously is going to have some ramifications economy-wide, which we hope will not inhibit the purchase goal that we have for this year,” Perdue told reporters on a conference call.

Before the trade deal, futures prices rose for goods like US corn and wheat on expectations for increased Chinese buying. The US Department of Agriculture (USDA) has not announced grain sales to China in its daily reporting system since the agreement.

“With the coronavirus, China appears to be shut down for the foreseeable future and that does not bode well for US corn prices,” said Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage in Iowa.

The US and Japan flew nationals out of China’s coronavirus epicentre, and Britain, France and Canada were also preparing for evacuations, as the number of deaths leapt above 170.

Mounting fears the fast-spreading virus would hurt demand for frying oil knocked down Malaysian palm oil futures by as much as 10 per cent on Tuesday, the most in over a decade.

Soybeans have historically represented about half the value of US agriculture exports to China.

Weekly soybean sales to China have averaged only about 220,000 tonnes since the beginning of this year, less than half the normal rate for early January in the years before the trade war, according to USDA data.

Shipments of previously sold soybeans have also lagged pre-trade war levels, with about 1.6 million tonnes inspected and loaded for export this month through January 23, according to USDA data. Inspections during that period in the five years before the trade war were between 2.2 million and 3.2 million tonnes.

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