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Coronavirus could prevent China from meeting $80B agriculture trade pledge

By
Jessie Higgins
The coronavirus has dramatically slowed trade with China, as ports are backed up and workers are staying home. File photo by Stephen Shaver/UPI
The coronavirus has dramatically slowed trade with China, as ports are backed up and workers are staying home. File photo by Stephen Shaver/UPI | License Photo

EVANSVILLE, Ind., Feb. 26 (UPI) -- With the phase one trade deal with China in effect for just under two weeks, agricultural experts fear the coronavirus outbreak will impede China's ability to buy a promised $80 billion in farm goods from the United States over the next two years.

Movement of goods in and out of China has all but stopped, businesses remain closed and workers are staying home. Chinese ports have no space for new ships carrying refrigerated cargo -- like pork, chicken or dairy. And there are long delays offloading other types of cargo.

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"The ports are so congested, it's hard to get anything into China at this point," said Arlan Suderman, the chief commodities economist at INTL FCStone, which provides commodities market analysis.

"People just aren't coming to work. I just talked with our Shanghai office and they said people are starting to get out and move about again. But we'll have to wait and see."

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In its most recent report on exports last week, the U.S. Department of Agriculture predicted that China would buy just $14 billion in American food this year, noting that the coronavirus could have a significant negative impact.

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"The current outlook for exports to China is tempered by significant uncertainties surrounding the COVID-19 outbreak, which may affect the timing of China's purchases under the phase one agreement during the calendar year," according to the report.

Experts were quick to point out that the USDA estimate, released Thursday, is for the fiscal year -- which began Oct. 1 and will end Sept. 30. The trade deal, by contrast, covers the 2020 calendar year.

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That gives China an additional three months outside the USDA prediction to make its promised purchases. What's more, China buys the majority of its commodity crops from the United States during those three months -- October to December, said Veronica Nigh, an economist with the American Farm Bureau Federation.

"We're already almost halfway through the fiscal year and the phase one trade deal just went into effect 10 days ago," Nigh said Monday.

But it does not necessarily mean China will meet the pledge, she added. Other issues besides the coronavirus could make it difficult for China to buy such a large quantity of American agricultural products.

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The spread of African swine fever has decimated China's hog population, cutting it in half, according to some estimates. Fewer hogs means China needs fewer soybeans, which are used mainly as hog feed and were previously America's largest agricultural export to China.

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That same disease, however, could mean America will export more pork, poultry and other meats to China, Nigh said.

Pork exports already are climbing, she said. In the first week of 2020, the United States exported 100,000 metric tons of pork to China. The average export volume is 120,000 metric tons per year.

China appears to also be selectively removing tariffs on U.S. agriculture, Nigh said.

"China has been waiving tariffs for some products for a while now," Nigh said. "And China last week announced a list of 700 products that importers could apply to have the tariffs waived for 365 days. That will pave the way for the fulfillment of the agreement if they don't have to pay tariffs for a year."

The tariff situation will matter little, however, if China's port activity remains stalled from the coronavirus, said Jenny Hopkinson, senior government relations representative for the National Farmers Union.

"China is not in the same position it was when it negotiated the phase one deal," Hopkinson said. "Will they hit the $40 billion? I don't know. The Farmers Union was skeptical when we signed the agreement, and I think we are still skeptical now."

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