Coronavirus adds uncertainty to Chinese purchase commitments

China recently stepped up its purchases of U.S. corn and cotton, said USDA chief economist Robert Johansson, but the coronavirus pandemic creates uncertainty about whether Beijing will meet its “phase one” purchase commitments. The agreement, signed on Jan. 15, calls on China to buy $40 billion worth of U.S. food, agricultural and seafood products this year and in 2021.

“I would say the coronavirus impacts are still causing uncertain demand in the United States as well as abroad. It would certainly only make those phase one commitments still ambitious and somewhat uncertain if the actual amounts will be met by the end of December,” said Johansson on a farmdoc Daily webinar on Friday. During a lengthy reply to the question if it was possible for China to fulfill its obligations, Johansson said “we certainly expect … it is still feasible,” and noted that some analysts regarded the commitments as ambitious.

Exporters reported the sale of 567,000 tonnes of U.S. corn worth $73 million to China on Friday, said the USDA.

Asked if the Trump administration would make another round of multibillion-dollar trade-war payments, Johansson said, “We’re certainly tracking progress on the phase one deal and providing that information to the administration.” Agriculture Secretary Sonny Perdue has tamped down speculation of the so-called Market Facilitation Program payments. President Trump said in late February that it if farmers need aid “until such time as the trade deals with China, Mexico, Canada and others fully kick in, that aid will be provided by the federal government.”

Also during the webinar, Johansson said the sharp decline in gasoline consumption that has accompanied stay-at-home orders would affect corn ethanol significantly at a time when farmers say they will expand corn plantings this spring. “We would expect domestic use to fall by about 10 percent, over 1.5 billion gallons of ethanol,” said the chief economist.