US and China sign phase one trade deal
On 15 January, the US and China signed a phase one trade deal. As part of the agreement, China will purchase at least an additional USD $200 billion of US products, relative to 2017 levels, over a two-year period.
As part of this, China has committed to buy an additional $32 billion of agricultural products over the period.
Grains and oilseeds are expected to fill between 50-60% of these targets, according to Rabobank. As such, it is likely that US exports of dairy and red meat products will benefit from the deal.
China already imports large quantities of US pork, despite the high retaliatory tariffs in place. Between January and November in 2019, the US exported almost 300,000 tonnes of fresh/frozen pork to China. This is over double shipments across the same period in 2018.
With the first phase agreed, it is likely that US pork exports to China will increase considerably. US pork prices are significantly lower than those in the EU. Although the US could capture some of the EU’s market share, with China’s import requirements for pork expected to increase this year, all major exporting nations will likely find demand, and strong prices, on the Chinese market this year.
However, a lack of detail about China’s agricultural pledge is causing uncertainty in the market. As such, it is unclear how much the US pork industry will benefit from the first phase of the trade agreement.
Additionally, the trade agreement is subject to the Chinese authorities enforcing purchasing from the US. Therefore, there is still the potential for tensions between the nations going forwards.