Trump’s hailing of $50 billion in Chinese farm purchases seen as ‘meaningless’

BEIJING: China is still a long way from forking out $50 billion for farm goods from the United States, agriculture industry analysts said on Monday, cautioning that getting there is contingent on removing substantial technical and political hurdles.
Outlining the first phase of a deal to end a trade war with China, US President Donald Trump on Friday lauded his counterparts for agreeing to make purchases of $40 billion to $50 billion in US agricultural goods.
That would be double the $24 billion China spent on American farm goods in 2017.
But Darin Friedrichs, senior Asia commodity analyst at brokerage INTL FCStone in Shanghai, threw cold water on the pledge. “I think it’s a meaningless big number, thrown out to get headlines, and won’t happen,” Friedrichs said.
Boosting purchases so substantially will depend on further progress on other, more thorny, issues still to be dealt with in the talks, said Friedrichs and others.
“It’s probably still dependent on a larger deal going through,” said Tobin Gorey, director of Agri Commodities Strategy at Commonwealth Bank in Sydney.
The emerging deal between China and the United States, covering agriculture, currency and some aspects of intellectual property protections, would represent the biggest step by the two countries in 15 months to end a tariff tit-for-tat that has whipsawed financial markets and slowed global growth.
US Treasury Secretary Steve Mnuchin has said the agriculture purchases would be scaled up annually.
But even with a breakthrough on bigger issues, scaling up farm imports to that level is a “big, big ask”, said Ole Houe, director of advisory services at brokerage IKON Commodities.
Soybeans made up more than half of China’s agriculture purchases from the United States in 2017, at about $13 billion. Bringing in significantly larger amounts of the oilseed will be difficult with African swine fever curbing soymeal demand in China, said Houe.
Substantially larger soy imports from the United States would also mean reduced purchases from other producers such as Brazil, where Chinese firms have invested heavily in recent years to accelerate Brazilian soybean shipments.
Imports of other products, ranging from corn to pork and beef, have always been much smaller than soybean sales, impacted by what the United States refers to as non-tariff barriers.
To boost imports of US beef, China would need to lift its ban on hormones and drug residues in meat, allowing for similar trading conditions as those prevailing in Japan and South Korea, said Joel Haggard, Asia president of the US Meat Export Federation.
That could see it export more than $1 billion in beef to China, he said, or ten times the current level, but it could take a year or two to ramp up those supplies.
Other China-based market watchers were cautious about expecting any notable increase in purchases beyond soybeans until a broader trade deal is finalised. — Reuters