It was clear following US and Chinese tariff implementation in July that world soybean flows will be altered dramatically. But following months of new data, the impact of these tariffs can be better quantified.
Through November, US ag exports to China totaled $8.8 Bil dollars. This compares to $19.5 Bil in 2017 and $17.3 Bil in Jan-Nov of 2017. In dollar terms, Chinese demand for US ag goods peaked in 2012, but generally China has become a solid market for US ag production. Ag exports to China in 2000 accounted for 3% of total US exports; in 2017 exports to China account for 14% of the total. We mention the USTR team is focused on dollar amounts as they work hard to return US-Chinese raw material trade. Priority number one is to recapture $20-21 Bil of Chinese import demand. It’s possible that even higher dollar amounts are being sought though.
US soybean exports to China account for 50-60% of the total value of ag exports to China, but the lack of Chinese buying has spilled into the whole of the US Ag sector. The graphic below shows that Chinese purchase of livestock/meats, feedgrain and dairy products plunged in spring, and have remain depressed throughout the trade dispute. The value of these exports in 2018 through November rests at $765 Mil, down 51% from the prior year. This has allowed US milk powder and cheese inventories to build substantially. China has been absent from the US sorghum market entirely since Sep. Livestock & meat exports in dollars are down 20% on the year.
It’s been rough on the ag sector, but this does highlight the potential for export growth if China’s market is re-captured. This underscores the importance of current negotiations as well as any actual deal to eliminate tariffs moving forward – not to mention growth in Chinese purchases.
It’s important that the US farmer is allowed to participate in an expanding world marketplace. In spite of US-China trade barriers, world ag trade will hit new record highs in 2018/19, and very likely will exceed this level in 2019/20. The graphic below shows global major ag trade. Combined trade in 18/19 is projected to reach 588 MMTs, vs. 565 a year ago and vs. 376 MMTs in 2010. The global ag economy is booming.
Population growth is slowing, but still some 800 million persons will be added to the world by 2025. Life expectancy and incomes are rising. It’s important that the US maintain a solid share of world ag trade. We’re hopeful that a series of bi-lateral trade agreements are reached in 2019, at which point the US will better experience rising global per-capita ag consumption levels.
