China still major driver in 2021 ag economic outlook

Farm Bureau economists weigh in on what the likely biggest ag market movers will be in 2021.


Jacqui Fatka, National Hog Farmer

Jan 12, 2021


China’s demand for protein, and feedstuffs to feed their domestic herd, remains the “big elephant in the room” when looking at how U.S. agricultural producers could build on what ended up being a strong 2020 finish. During an economic outlook session held during the American Farm Bureau Federation’s virtual convention Jan. 12, three in-house economists offered positive indicators of more good news ahead.


Michael Nepveux, AFBF livestock economist, says that the trade war overshadowed the downward spiral African Swine Fever had on China’s domestic production since decimating the country’s hog herd starting in 2018, but China is still “very much a driver in livestock and protein markets.” China accounts for half of the world’s consumption and production of pork. When 25-30% of China’s production disappeared, it left a huge hole in pork markets that shifted around global trade flows, Nepveux says.


This brought about large increases in pork, beef and poultry exports to China. Prior to 2020, poultry imports were limited but the technical changes included in the phase one agreement allowed for resumption of poultry trade.


Nepveux says China is looking at a 10-20% increase in domestic pork production but is still facing a deficit in its pork supply. U.S. pork exports are up 7% to China and beef up 13%.


Foreign Agricultural Service shipment data shows both beef and pork exports should finish the 2020 year strong. Nepveux says there’s a lot of momentum heading into 2021 as China rebuilds its swine herd. If China doesn’t get it from the U.S., they’re still importing as much beef, pork and chicken as they can, he explains.


AFBF Economist Shelby Myers adds, “Despite tariffs, China is returning as a demand partner for U.S. commodities.”


Myers notes that China also has imported more U.S. corn than ever before, going from the 15th largest destination for U.S. corn to fourth. And China is also expected to import record amounts of soybeans as it looks to rebuild its herd. “They want livestock feed,” Myers adds, noting that world imports also point to higher levels for sorghum, barley and wheat.


Brazil’s drought and Argentina’s suspension of corn exports until March 1 also make the U.S. an “attractive export partner,” Myers says.


Lead AFBF Economist John Newton says China is not expected to meet its phase one year one target of $33-$36 billion, but currently sits at $22.5 billion with 11 months of data. He says China will likely fall short on those targets depending on how strong exports finish in December, but still at record levels of trade.


The million-dollar question is how President-elect Joe Biden views China and whether he will continue or not continue the phase one agreement and if there will be a phase two. He says AFBF will work with the new U.S. Trade Representative to communicate the benefits of the first installment.


Trade outlook ...


Drought implications ...