Impact of COVID-19 on Agriculture

Updated Outlook on U.S. Exports to China

Market Intel / December 8, 2020

Credit: iStockPhoto 

In late October USDA and USTR jointly issued a report highlighting the progress made to date in implementing the agricultural provisions in the U.S.-China Phase 1 Economic and Trade Agreement. Specifically, the report indicated that at least 50 of the 57 technical commitments under the Phase 1 agreement had been implemented and that China had substantially accelerated its purchases of U.S. agricultural products. Today’s article reviews U.S. census agricultural trade data and Foreign Agricultural Service export sales data to evaluate accumulated and outstand export sales to China during the 2020 calendar year.

Tracking Phase I

All eyes have been on China since the implementation of the Phase 1 deal in February 2020. As a reminder, the Phase 1 deal commits China to importing around $36.5 billion in agricultural goods in calendar year 2020. For the month of October, agricultural products shipped to China totaled over $17.5 billion. This represents exceptionally strong exports by historical standards, however, China is still not on pace to meet the lofty goals included in the Phase I agreement. 

Expand Image

Current Outstanding Sales

Some industry insiders are worried the rising tensions between the two countries will hurt outstanding sales, which have been made but not shipped, meaning they could be cancelled. It is not at all uncommon for China to cancel sales for a variety of reasons. USDA’s Foreign Agricultural Service tracks this information through the export sales reporting program. The program requires U.S. exporters to report sales of certain commodities to FAS each week. In addition to the weekly requirement, daily reporting is required when a single exporter sells a very large quantity, i.e., an exporter sells more than 100,000 metric tons of wheat or corn in one sale. As of November 26, the U.S. had a variety of commodities with large volumes of outstanding sales (Table 1). U.S. exporters had nearly 10 MMT in soybeans, nearly 8 MMT in corn, nearly 2.5 MMT in sorghum, and nearly 2 million bales of cotton in outstanding sales to China.

The export sales reporting system only reports the volume of commodities. However, using  FAS’ Global Agricultural Trade System, one can use reported value and volume of exports to calculate an implied export value of those products. Table 1 uses October 2020 values and volumes for each commodity to China to calculate a recent “implied export value” and from there comes to a rough estimate of the potential value of these outstanding sales. Using these assumptions, the U.S. has over $4.1 billion in outstanding sales of soybeans to China that could be under threat of a response from the Chinese government. This is in addition to $1.4 billion in outstanding sales of corn, $595 million in cotton, $585 million in sorghum,  $197 million in wheat, $180 million in beef, and $220 million in pork.

Contact:
Michael Nepveux
Economist
(202) 406-3623
michaeln@fb.org
twitter.com/@NepveuxMichael
 
John Newton, Ph.D.
Chief Economist
(202) 406-3729
jnewton@fb.org
twitter.com/@New10_AgEcon
 

Share This Article

Credit: Arkansas Farm Bureau, used with permission.  

Released on Sept. 30, USDA’s Quarterly Grain Stocks Report showed that as of Sept. 1 old-crop corn and soybean inventory levels had dropped, compelling USDA to update supply and demand expectations in the October World Agricultural Supply and Demand Estimates, released on Oct. 12. Much higher-than-expected soybean stocks and the subsequent adjustments made for old and new crop supply and demand pushed soybean prices for the 2020/21 marketing year average and the 2021/22 marketing year down sharply.

Full Article
Credit: Sobia Akhtar on Pexels / CC0 

Today’s article highlights the recent expansion of coverage signed into law as part of H.R. 5305, the Extending Government Funding and Delivering Emergency Assistance Act, more widely known as the continuing resolution (CR).

Full Article