U.S. ag exports have gained limited traction from President Trump’s ballyhooed trade victories, but Agriculture Secretary Sonny Perdue is optimistic that demand will improve. “I hope we can show that a third round [of trade war payments] is not needed for 2020,” Perdue said in a statement. “We still believe farmers want trade rather than aid.”
Trump opened the door to a new multibillion-dollar round of cash payments to farmers and ranchers last week, saying on social media that if farmers “need additional 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.” The tweet followed a USDA forecast of a 3 percent increase in ag exports this year compared to fiscal 2019. Sales to China were estimated at $14 billion, a $4 billion improvement from last year but just one-third of the level agreed to in the “phase one” agreement that de-escalated the Sino-U.S. trade war.
“We certainly haven’t seen the market rise as we were hoping after the phase one agreement, but I believe it will,” said Perdue.
Treasury Secretary Steven Mnuchin said over the weekend that the administration expects Beijing to honor its commitments despite the outbreak of the Wuhan coronavirus, reported Reuters. In an interview, Mnuchin told the news agency that the coronavirus might delay the start of negotiations for a “phase two” agreement on structural change in China.
“With the China phase one deal, the Japan agreement, and the USMCA, we expect exports to grow and to get better,” said Perdue. “We expect the demand to be better. The president’s tweet … shows that he stands prepared to do another round of MFP if necessary.”
Trump frequently extols the “historic trade deals” secured by his administration, such as the “phase one” deal with China, congressional approval of the United States-Mexico-Canada Agreement, and a revamped U.S.-Japan free trade agreement that gives U.S. agriculture substantially the same market access granted to the so-called TPP 11 countries.
“You got to get bigger tractors. You got to buy a little more land,” Trump said a week ago in lauding the China agreement during a visit to California’s agricultural Central Valley. The president reminded the crowd of the $23 billion paid to farmers to mitigate the impact of the trade war on U.S. agriculture in 2018 and 2019. “The farmers said to me, ‘We don’t want this money. We just want a level playing field.’ I got you better than a level playing field, okay? Better,” said the president.
Exports generate 20 cents of each $1 in farm income. China, the world’s largest soybean and cotton importer, was the No. 1 customer for U.S. farm exports until the trade war intensified in 2018. It fell to fourth place in 2019 and would trail Canada and Mexico as No. 3 this year. The United States’ North American neighbors account for 30 percent of U.S. ag exports, forecast at $139.5 billion in fiscal 2020, which ends on Sept. 30.
Futures prices for corn, soybeans, wheat, cattle, and hogs fell on Monday as fear of trade disruptions and the spread of the coronavirus hit commodity and financial markets. Wheat futures fell by 3 percent and soybeans by 2 percent.