China may fail to meet targetted imports of US farm goods due to swine flu
AN outbreak of swine flu in China has killed off many of the pigs that would have been fed US-made soybeans that are part of a trade deal in which China has promised to purchase up to US$50 billion in US agricultural goods over two years, delivering a blow to US Midwest soybean farmers
AN outbreak of swine flu in China has killed off many of the pigs that would have been fed US-made soybeans that are part of a trade deal in which China has promised to purchase up to US$50 billion in US agricultural goods over two years, delivering a blow to US Midwest soybean farmers.
'Meeting this target will be quite challenging because around 70 per cent of China's agricultural imports from the US before the trade war were soybeans' and almost all soybean imported into China are used for animal feed, Nomura economists led by Lu Ting wrote in a research note, reported Bloomberg News.
Hog stocks are down 40 per cent in the last year, and will take a while to return to earlier levels.
China aims to buy at least $20 billion of agricultural products in a year if it signs a partial trade deal with the US, and would consider boosting purchases further in future rounds of trade talks, people familiar with the matter told Bloomberg.
That would take China's imports of US farm goods back to 2017 levels, before US President Donald Trump launched a tit-for-tat tariff row with Beijing. In the second year of a potential final deal, purchases could rise to $40 billion to $50 billion, if Mr Trump removed the remaining punitive tariffs, the sources said.
However, Chinese negotiators have made clear that their purchases will be based on real demand, and if there's fewer animals to eat the feed, then that means imports may not rise as much as some expect.
'Even considering the rising output of poultry and other meat, we expect a 15 per cent contraction in soybean import demand in 2020' from the level in 2017, Nomura said.
There's also the question of whether American farmers would be willing and able to increase exports enough to meet the target. There's still a lot of uncertainty in negotiations between the US and China, and Nomura argued farmers may be unwilling to significantly increase plantings or divert shipments to China from other destinations if there's a risk that China could stop buying again.
From a peak of 34 million tonnes in 2016, Chinese imports of US soybeans dropped to 14 million last year. That could rise to 43 million tonnes over the next year, Nomura estimated, but that's still nowhere near enough to meet the high target.