China May Buy U.S. Ag Products For State Reserves
An official from China’s Ministry of Commerce said today that the U.S. and China should increase cooperation between the two countries to help revive the global economy in the midst of coronavirus pandemic.
While the details aren’t firm as of yet, this report suggests the possibility of China buying:
- Ten million tonnes of U.S. soybeans for state reserves if demand from private buyers isn’t enough.
- An unspecified amount of U.S. origin corn to fulfill its annual import quota of 7.2 million tonnes, potentially reaching a total of 20 million tonnes.
- One million tonnes of U.S. cotton.
Wheat and meat imports were not specifically mentioned in the report, but Chinese buying of those products has been ongoing.
What this means for the U.S. farmer
China needs to accelerate purchases of U.S. farm goods to meet its Phase 1 trade deal commitments. The coronavirus pandemic delayed some imports, and China is reportedly concerned about potential supply disruptions. After the deal was signed in December, China was expected to make $50 billion in agriculture purchases over the next two years.
Reports of Chinese buying have helped prices recover from recent depressed levels. The question becomes whether their purchases can overcome the bearish influence of ethanol, biofuel and other coronavirus-related demand destruction.
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