What Renegotiating China Phase One Agreement Would Mean for Grain Prices

Tyne Morgan

November 16, 2020

After years of trade turmoil, the export picture is picking up, with China importing more agricultural products from the U.S. American Farm Bureau Chief Economist John Newton says agricultural exports to China jumped 200% in September 2020 compared to September of 2019.

According to analysts on U.S Farm Report this weekend, China is ramping up its buys because it needs the commodities, not because the country is trying to live up to the Phase One Trade Agreement between the U.S. and China.

“Let's face it, their stocks were definitely getting depleted,” says Naomi Blohm of Total Farm Marketing, a subsidiary of Stewart-Peterson. “Going forward and in the short-term, I think they have what they need to get by, but they're going to be needing more because of that hog herd rebuilding and the feed demand that's there.”

“I would agree that they're buying largely what they need right now,” says Arlan Suderman of StoneX Group, Inc. “If they were really committed to the Phase One trade agreement, we would see them remove barriers to import large volumes of ethanol and dried distillers grains, and they're not doing that. That shows me they're not really committed.”

Chinese media recently reported China will work to renegotiate the Phase One Trade Agreement under a Biden Administration, citing the trade deal is viewed as “twisted” in the United States’ favor.

As agriculture awaits what a Biden Administration will mean for the future of trade, especially when it comes to doing business with China, one agricultural leader thinks agricultural trade market share could grow under President-elect Joe Biden.

“The President-elect understands, just like your listeners do, that 20% of our agricultural income is directly related to trade,” said Michael Scuse, former acting United States Secretary of Agriculture, during an interview on AgriTalk. “If you look at the numbers over the last few years, because of the trade situation between the United States and in China, those numbers have plummeted. And I do believe that he [President-elect Biden] will do what he can to enforce that Phase One agreement, so that we can get trade with China back to, not just where it was a few years ago when we were exporting about $24 to $25 billion worth of Ag products to China, but up between $35 and $40 billion, which is what the commitment is.”