As farmers enter the month of March, questions continue to surround China and if the mega economic country will follow-through on its $40 billion trade promise. The questions are sprouting from a lack of export activity to China, even after the Phase One signing.
Chinese leaders acknowledging the trade pact last week, saying they are still committed to honoring that trade promise, despite the uncertainty around coronavirus. USDA Secretary Sonny Perdue echoing that, telling Farm Journal recent actions by China point to their commitment to make good on trade promises made earlier this year. He expects to see some purchases pick up soon.
“I do expect it to happen,” says Perdue. “Obviously from the movement standpoint, it’s going to depend to some degree on the impact from coronavirus. When people can’t get physically to the port or are quarantined and not able to come to work, then you have backups, but I expect the purchases to show up. I expect the movements to come up.”
Perdue says while he does expect to see some buys from China soon, producers need to remember this isn’t a time period when South America typically comes to the U.S. to buy certain commodities, especially crops like soybeans.
“We also have to understand we are in the counter-cyclical shipment period for the U.S.,” explains Perdue. “We are in the Brazilian and South American harvest now. This is typically a time when they will buy from South America, rather than soybeans in storage here, so you have to take the cyclical aspect of trade, as well.”
While big buys aren’t in the books yet, Perdue says work is going on behind the scenes and on a technical level to clear the way for more export shipment to China. Those steps are needed to help the flow of exports once the buys pick up.
“The regulatory agencies in China are making changes that will facilitate that kind of trade to happen,” he says. “That was going to have to happen anyway. Obviously, the virus is concerning, but I think most of us thought [purchases from China] would just pop just like that, and we were hoping it would. I think that’s why the markets have not responded, but China has a lot of work to do to facilitate that level trade.”
If demand doesn’t pick up in the coming months, and China isn’t clambering to buy U.S. ag goods, USDA and the Trump Administration acknowledged they may need to facilitate a third round of Market Facilitation Program (MFP) payments. However, Perdue made it clear those payments don’t hinge on commodity prices; that decision will be based on the export picture overall.
“We are tracking export numbers, and if we don’t see those kind of things, and we can certainly diagnose that those are due to trade disruptions, tariff issues or non-committal of numbers that we’ve negotiated, then we’ll be prepared to make a recommendation to the President,” says Perdue. “I think he would certainly be prepared to receive that, and as we know, he can make a recommendation before I do.”
USDA Under Secretary Bill Northey also saying the MFP 3.0 decision will be based on how exports are tracking, therefore, it’s too early to make the call on whether USDA will issue MFP 3.0 or not.
“I would say later this year, looking at the 2020 crop; I don’t know whether that’s summer or fall,” says Northey. “I don’t know what that timetable is. We’ll get a sense as we get closer and see ‘are we seeing trade step up such that it feels back to a normal situation? Are we seeing the market still struggle? Are we seeing some hangover from the last two years?’ It may be a challenge to evaluate which commodities, because we may see differences between commodities where some are moving better because of the trade improvements and some aren’t. But it’ll be later this year before we would reevaluate.”
From UDSA officials to market analysts, many reminding farmers to not bank on MFP 3.0 in 2020. Market analysts say farmers who base their planting decisions on possible MFP payments is a dangerous game to play.
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