America’s Farm Belt Looks Safe From Latest U.S.-China Spat

High-level talks between Beijing and Washington may have broken down into bickering, but American farmers are still selling boatloads of corn to Chinese importers.

The U.S. Department of Agriculture announced almost 4 million metric tons of corn sales to China last week. That’s on top of 5 million tons sold in January and February, or more than five times the amount a year earlier.

It just goes to show what some farmers have long been hoping for: When China needs to make big purchases of crops like corn, the country will have little choice but to do business with the U.S.

“As long as the U.S. is the most competitively priced source, trade with China will be outside the noise of politics,” Ken Morrison, a St. Louis-based independent commodity trader, said by email.

America’s Farm Belt Looks Safe From Latest U.S.-China Spat

The market may get fresh indications of where trade relations are headed following U.S. Agriculture Secretary Tom Vilsack’s discussion with his Chinese counterpart Monday night.

During Donald Trump’s trade war with China, the Asian superpower’s appetite for American crops slowed as the world’s biggest buyer of corn and soybeans turned to Brazil to meet demand. But that also corresponded to a time when Chinese hogs were being ravaged by deadly African swine fever, curbing the need for livestock feed.

Now that the pig herd is being rebuilt, demand is on the upswing again. Plus, it’s coming at a time when South American farmers have suffered through some adverse weather and China has depleted its corn stockpiles.

As a result, China, the world’s No. 1 pork producer, has bought a record amount of corn this season, and soybean purchases are running at the highest level in USDA data going back to 1991. That’s sent futures for the commodities to multi-year highs.

New Study

A new analysis from Iowa State University shows that the Asian country’s reported pig losses last year were larger than the official figures indicated. Scott Irwin, an agriculture economist at University of Illinois, said the report’s findings should translate into “large demand for both corn and soybean meal as the herd recovers for real into 2022.”

As far as U.S.-China trade relations, there’s speculation that the most recent flurry of corn purchases could portend well for upcoming negotiations.

“It’s interesting that the purchases happened the week of the meeting,” said John Baize, an independent agriculture trade analyst based outside of Washington. “China wanted to send a positive signal,” he said.

“They are very good at timing things.”

Baize, who also advises the U.S. Soybean Export Council, said he thinks the corn sales to China that the USDA reported last week represented fresh demand, rather than bookings that were made previously and then just switched to American sellers.

Still, China in 2020 fell short of meeting its pledge to buy $36.5 billion in American agricultural goods during the first year of the phase-one trade deal. Baize and others said they expect robust demand to continue, and that will benefit grain markets even if the country again doesn’t quite meet its commitment, which for 2021 is about $43.5 billion.

“The bottom line is China needs to buy a lot of grain,” said Dan Cekander, a fourth-generation corn and soybean farmer in central Illinois. “It would take something pretty severe to stop China’s purchasing of U.S. agriculture commodities.”

©2021 Bloomberg L.P.

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