U.S. and China inch towards trade deal

Dec 13, 2019

China will purchase upwards of US$50 billion of U.S. ag products in 2020 as part of the agreement

By Diego Flammini
Staff Writer
Farms.com

The United States and China have agreed to the text for a phase one trade agreement, officials from both countries announced today.

“President Trump has focused on concluding a Phase One agreement that achieves meaningful, fully-enforceable structural changes and begins rebalancing the U.S.-China trade relationship,” U.S. Trade Representative Robert Lighthizer said in a Friday statement.

During a press conference in Beijing, Chinese officials confirmed the agreement contains nine chapters including intellectual property, technology transfer and market access, the L.A. Times reported.

From an ag perspective, this trade deal could be beneficial.

As part of the deal, China has agreed to purchase between US$40 and US$50 billion of American ag products in 2020.

Han Jun, China’s vice-minister of agriculture, confirmed that the country would buy more U.S. ag commodities, but didn’t provide specifics, CNBC reported.

In 2017, the U.S. exported almost US$24 billion of farm goods to China. In 2018, as the trade war continued, China only imported US$9.2 billion of U.S. ag products.

Commodity markets reacted favorably when news of a trade agreement started to spread on Thursday.

“We got a rally yesterday,” Moe Agostino, chief commodity strategist with Farms.com Risk Management, told Farms.com. “We weren’t able to hold the gains, but I think the market is confident that we’re getting closer. It’s a step in the right direction and insiders are buying because they know more than we do.”

One potential issue with the Chinese commitment to purchase so much U.S. ag in one year is how the sudden boost in demand affects prices.

If commodity prices climb too high, however, China may not be inclined to buy, Agostino said.

“China likes to buy (commodities) when it needs them and it likes to buy cheap,” he said. “If prices explode because there’s a reintroduced demand, then you’re not buying cheap anymore.”

Farms.com has reached out to U.S. farm organizations for comment.

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