Column: China trade truce could benefit more U.S. agriculture than just soy - Braun


Karen Braun, Reuters 

December 4, 2018


CHICAGO (Reuters) - The recent meeting in Argentina between U.S. President Donald Trump and Chinese President Xi Jinping seems to have gone better than expected by many agriculture market participants, as it suggested a possible end to the ongoing trade war and a prospective boost to U.S. exports.


The White House announced over the weekend that Beijing had agreed to buy an unspecified but “very substantial” amount of U.S. commodities, and that purchases of agricultural goods would start “immediately.”


Soybeans are the most obvious starting point...


... A deadly outbreak of African Swine Fever (ASF) may also curb soybean demand as there would be fewer hogs to feed. More than 70 cases have been reported across Chinese farms since early August.


If ASF is to curb feed usage, it may be a little contradictory to assume that China would be aggressively looking to import other feed grains right now. But it is possible given the miniscule amounts of U.S. agriculture products Chinese buyers have scooped up recently.




... If the ASF outbreak reduces overall demand for feed ingredients, it may be good news for U.S. pork producers. Last week, USDA reported that China had bought its largest weekly volume of U.S. pork since April 2017.


The sales took place in the week ended Nov. 22 and called for 3,348 tons of pork to be shipped this year, and 9,384 tons for next year. China has a 62 percent duty on U.S. pork, so the purchase may be a sign that the ASF situation is worse than reported. Chinese pork demand is typically heightened ahead of the New Year celebrations, which begin on Feb. 5.


Outside of the livestock arena, U.S. ethanol should be another hopeful to make China’s wish list. Beijing last year announced it planned to implement nationwide use of ethanol in gasoline by 2020. Just before the trade war began earlier this year, some analysts predicted U.S. ethanol exports to China in 2018 could comfortably surpass the previous high.


Although it has recently been revealed that China has much more corn than market participants believed, the country’s processing capacity is likely not robust enough to produce the ethanol volumes required, hence the need for imports.


And the potential there is huge. China is the world’s largest automobile market but produces only 5 percent as much ethanol as the United States each year.