When Can Farmers Expect Benefits from China Trade Agreement?

Farmers and Ranchers Face Harsh Reality Check after the Phase-one China Trade Agreement

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USDA Secretary Perdue called the January 15, 2020 pact a “bonanza” for U.S. ag, but it could be a while before farmers reap its benefits.

According to Maxson Irsik, K·Coe Isom advisor, “It may be months or even years before American farmers and ranchers see increased exports to the Asian nation.”

While the first phase trade agreement with China is welcome news for ag producers, it provides little in the way of ‘guarantees’ or immediate benefits.

The Pros

Ag provision highlights included:

  • sanitary and phytosanitary (SPS) standards and other non-tariff barriers to trade – beneficial provisions that finalize agreements pursued by a number of past U.S. administrations and should help boost U.S. agricultural exports to China over the long-term.
  • more protection for the intellectual property of U.S. companies and the end of a requirement of American businesses to share their technology as a cost of doing business with China – critically important.
  • promises by China to increase imports from the U.S. – to increase purchases of U.S. agricultural products by $32 billion in the next two years ($80 billion worth of American farm goods). To meet this target, U.S. soybeans, pork, meats, cotton and dairy products will need to be on China’s shopping list.

The Cons

There is a lot of fine print for U.S. agricultural producers to be cautioned about.  There is agreement language that could provide a potential loophole, and uncertainty surrounding export amounts.

Additionally, Irsik expresses concern that, “Unless and until the retaliatory tariffs are removed, U.S. ag products cannot compete on market prices in China, and there is little to no chance of a significant increase in ag purchases by China.”

There is also uncertainty regarding what China will do, as many expect that China’s purchase of U.S. ag products won’t materialize until the second part of 2020 – when harvest is underway and prices are typically lower.  An added complexity now comes from the coronavirus (COVID-19) spread within China and its impacts.

In the wake of these circumstances, Irsik advises ag producers to “keep operating as lean and mean as you can.”

 READ MORE ON THE AGREEMENT…

Max Irsik summarizes the optimism, realities, fine print details, and expectations from China for farmers and ranchers in his recent High Plains Journal column:  Optimism Meets Reality in Phase One Trade Agreement with China

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