China delivers blow to US trade as it shuts the door on all agricultural products

Chinese companies have stopped buying US agricultural products, China's Commerce Ministry said on Tuesday (6 August), a blow to US farmers who have already seen their exports slashed by the continuing trade war.
calendar icon 6 August 2019
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Reuters reports that China may also impose additional tariffs on US farm products, raising the barrier to future trade that further targets rural states that supported US President Donald Trump in the 2016 election.

Trump said on Thursday (1 August) that Beijing had not fulfilled a promise to buy large volumes of US farm products and vowed to impose new tariffs on around $300 billion of Chinese goods, abruptly dimming prospects of a trade deal.

China on Monday also let the yuan weaken past the key 7-per-dollar level for the first time in more than a decade. The United States responded by designating China a currency manipulator.

American Farm Bureau Federation President Zippy Duvall called the announcement from China "a body blow to thousands of farmers and ranchers who are already struggling to get by."

Tariffs imposed by China on US soybeans have slashed exports of the most valuable US crop and forced Trump's administration to compensate farmers for two years with combined spending of as much as $28 billion.

China imported $9.1 billion of US farm produce in 2018 - mainly soybeans, dairy, sorghum and pork - down from $19.5 billion in 2017, according to the American Farm Bureau.

The National Pork Producers Council said in an email it was important to end the trade war so pork producers could "more fully participate in a historic sales opportunity."

An outbreak of African swine fever has resulted in the deaths of millions of pigs in China. US meat exporters had hoped to take advantage of the disease to export more pork to China but 62 percent retaliatory tariffs have limited sales from the United States.

China's Ministry of Commerce said in a statement it hoped the United States would keep its promises and create the "necessary conditions" for bilateral cooperation.

Earlier, China's state broadcaster CCTV reported an official from China's National Development and Reform Commission (NDRC) as saying Trump's accusations that it had not bought promised volumes of US agricultural goods as "groundless."

Overall, China has purchased about 14.3 million tonnes of last season's soybean crop, the least in 11 years, and some 3.7 million tonnes still need to be shipped, according to US data. China bought 32.9 million tonnes of US soybeans in 2017, before the trade war.

China applied a 25 percent tariff on soybeans in July of last year in response to US tariffs on Chinese goods.

China is honouring agreements signed earlier to import US soybeans, according to Cong Liang, secretary general of China's NDRC, CCTV reported. The report said that 2.27 million tonnes of US soybeans had been loaded and shipped to China in July, since Trump met Chinese President Xi Jinping in Osaka at the G20 summit at the end of June.

China bought 130,000 tonnes of soybeans, 120,000 tonnes of sorghum, 60,000 tonnes of wheat, 40,000 tonnes of pork and products, and 25,000 tonnes of cotton from the United States between 19 July and 2 August, Cong said according to the report.

Weekly US data on 1 August confirmed the first new US soybean sale to China since June, of 68,000 tonnes from the crop that will be harvested this fall. Additional sales through 1 August could be recorded in the next US government export sales report on Thursday.

Two million tonnes of US soybeans destined for China will be loaded in August, followed by another 300,000 tonnes in September, Cong said.

However, the US Department of Agriculture said on Monday less than 600,000 tonnes of soybeans were inspected for export to China the week ended 1 August, fewer than the previous week.

Benchmark Chicago soy prices fell last week more than 3 percent as the trade war escalated, and on Monday touched their lowest price since 12 June.

Farmers can start applying for the next round of trade aid this month, but trade uncertainty makes long-term planning difficult.

"We've been thankful for the aid payments. They have helped but we'd rather have open markets because it creates stability in our financial sectors," said Derek Sawyer, 39, a corn, soybean, wheat and cattle farm from McPherson, Kansas.

"There's just so much volatility right now because nobody knows the rules of the game and nobody knows how to look at things going forward."

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