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China is missing phase one ag targets

Despite acceleration of corn, soybean purchases, China on track to buy less than one-third of promised purchases.

Bloomberg, Content provider

August 17, 2020

3 Min Read
China-US trade war expressed in a chess game
Jae Young Ju/iStock/Getty Images Plus

By Ana Monteiro

The head of the U.S.’s busiest port said China is on track to buy less than one-third of the American agricultural products it promised to purchase in 2020, the first year of a trade pact between the world’s two biggest economies.

“The phase-one trade deal set lofty expectations for purchases that had not been witnessed by American agriculture producers ever -- what we’ve seen so far is a requirement to buy $36 billion worth of goods, and we may edge our way towards $10 billion,” Gene Seroka, executive director of the Port of Los Angeles, said on a webcast Thursday. “We’ve got so much to catch up on in the back half of this year.”

The Asian nation has recently accelerated purchases of U.S. corn and soybeans, but the transactions may be insufficient to help it reach the target to buy $36.5 billion of agricultural goods this year, 52% more than in 2017, as it pledged in the Jan. 15 agreement.

Negotiators are supposed to meet in coming days to review progress on the deal meant to cool tensions in a more than two-year tariff war. The coronavirus crisis and the deterioration in U.S.-China relations on everything from tech security to Hong Kong has left trade a rare area of cooperation.

President Donald Trump has indicated that he and U.S. Trade Representative Robert Lighthizer are pleased with China’s recent purchases.

Related:Midweek Markets: China, China, China

“They are giving the Midwest, our farmers, among the largest orders they’ve ever seen,” Trump said during a press briefing this week. “Somebody told me today -- Bob Lighthizer said about 40% of what they’re selling now is going to China. So maybe they’re trying to make me change my mind a little bit, because you know my attitude on China, and it’s not -- it hasn’t been very good.”

Soybean futures in the U.S. recently traded near $8.96 a bushel, down 3.6% since the deal was signed.

‘It Takes Two’

Foreign ministry spokesman Zhao Lijian reiterated at a regular briefing in Beijing on Friday that China is meeting its obligations but urged the U.S. to respect Chinese companies. Washington has recently cracked down on businesses including TikTok and WeChat.

“It takes two to cooperate and overcome the difficulties,” Zhao said. “We hope the U.S. can stop its restrictions and discriminatory measures on Chinese companies to create conditions for the implementation of the phase one trade deal.”

Zhao says information on high-level talks will be released “in due course.”

Sitting at the confluence of the dispute is the Port of Los Angeles, a key gateway for U.S.-Asia trade that has seen tariffs throw buying patterns off kilter, followed by the pandemic’s disruption of seasonal flows of supply and demand.

Related:Trump says Phase 2 China deal unlikely

Data released Thursday showed that while the number of outbound containers rose 15% in July from June, they’re down 22% from a year earlier and have declined in all but one of the past 22 months on an annual basis. Imports also improved month on month as businesses restocked warehouses to replenish lean inventories, but fell 4.3% from 2019.

Total volumes have declined for 11 straight months and dropped 6% in July from a year earlier. Through the first seven months of the year, overall volumes are down 15% compared with the same period in 2019.

While August import data are encouraging as firms continue to restock and show signs of preparing for the year-end holiday season, outbound shipments must still pick up, Seroka said.

Another sign that imports will improve while exports lag is the increase to an 11-month high in empties, or containers that go to other destinations with nothing in them, but return to Los Angeles loaded with goods.

“We need an all-out American effort to drive exports,” Seroka said. “We have a natural imbalance of imports versus exports only exacerbated now by these trade policies.” The decline in the export business “puts rail cars out of balance, engine power, crew -- our trucks are hauling one-way freight.”

--With assistance from Sharon Chen.

To contact the reporter on this story:

Ana Monteiro in Washington at [email protected]

To contact the editors responsible for this story:

Brendan Murray at [email protected];

Margaret Collins at [email protected]

Zoe Schneeweiss, Richard Bravo

© 2020 Bloomberg L.P.

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