Jo Biden, the Democratic party’s candidate who will challenge Donald Trump in November for the US presidency, has declared the famous trade deal signed with China in January to be "failing - badly". On the evidence so far he has a point. But the jury is still out - calling the verdict now is premature.
Under the "Phase 1" trade deal China agreed to many things in return for a cut in the tariffs the US imposed last year on a range of Chinese imports. Part of the deal was that China would ensure additional purchases of US agricultural products by $32bn over the next two years. This was split into two - for 2020 it is $12bn above a 2017 baseline of $24bn, and for 2021 an additional $19.5n.
By June this year China had reached less than a quarter of the agreed deal’s manufactured, energy, and agricultural goods from the US, although it did buy two massive tranches of US corn in July, more than 3m tonnes in total.
No doubt the slow pace of trade will be at the centre of discussions between China and US representatives when they meet on or around 15 August.
Maybe all that American corn will just replenish China’s reserves. It auctioned off almost 4m tonnes of corn this week. All was bought - has has been the case for the past 11 weeks - at an average Yuan 2,005 ($288.73) per tonne.
The 2020-21 corn marketing year is does not start until September but China has so far booked the biggest corn delivery ever for a future marketing year. The most US corn ever shipped to China was in the 2011-12 marketing year, 5.15m tonnes, when it fetched an average export price of $300 per tonne.
China can’t produce enough corn for itself - the corn area harvested dropped in 2019 by some 500,000 hectares. China’s corn consumption is set to outstrip domestic supply during 2020-21 by around 27m tonnes.
Pigs and floods
China has been inundated with the worst floods since 1998; an estimated 16m people were flooded out of farm and home. The corn in the north and northeast of China - to be harvested in September - has been damaged and without sufficient sunshine for good crop development.
Meanwhile China is struggling to contain fresh outbreaks of African Swine Fever (AFS), lethal to pigs. Around 20 provinces had AFS incidences in July. In 2019 around 40% of its pig herd - maybe 180 million pigs - either died or were culled in a largely failed attempt to prevent the disease spreading. Corn is one of the staple feedstuffs for Chinese piggeries, which have been trying to re-stock since last year’s AFS catastrophe.
Maybe Biden is right, and that January deal will not be a success. But it’s too early in the 2020-21 marketing year - which really kicks off in September - to be certain.
The USDA expects China will import a record 7m tonnes of corn in 2020-21, partly because it needs to turn over its state reserves. Not all of that corn will come from the US - Ukraine, which the USDA expects will harvest almost 3m tonnes more corn, 38.3m tonnes in 2020-21 than the previous year - will be a hot competitor - but the US can look forward to a bumper harvest and bumper exports.