Farm economist still waits for commodity markets to improve after China deal announces

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The first phase of the trade deal between China and the United States has been signed, but commodity markets have not changed much, according to an agricultural economist.

Scott Stiles, extension economist for the Agriculture System Division at the University of Arkansas, said many producers across the United States, especially those heavily invested in export products, are awaiting the signing. part of phase one of a trade agreement between the United States. and China, and the issuance of the third payment of the market facilitation program.

After months of negotiations, the first phase was signed by President Donald Trump and Chinese Vice Premier Liu He in mid-January. Given hopes the deal would boost U.S. commodity exports, however, markets reacted to the signing somewhat disappointing, Stiles said.

“To tell the truth, commodity prices reacted more favorably to the announcement of the phase one deal on Dec. 13,” Stiles said. “The phrase ‘buy the rumor, sell the fact’ is frequently used in commodities trading. This is exactly what we have seen. The prices of grains, pork and cotton all increased during the last half of December ’19 and early January. Since the signing of Phase 1 on January 15, soybeans have lost more than 30 cents. The other raw materials resist.

The deal is “short on details,” said Stiles, at 96 pages and seven chapters, with about a quarter of its language dealing with intellectual property. In the deal, China agreed to import about $ 32 billion in additional U.S. agricultural products – in addition to a baseline of $ 24 billion – over a two-year period, largely by excluding some agricultural products import tariffs.

“China has not made a commitment to grant tariff exemptions or import levels for specific products,” Stiles said. “A disappointment for the farming community was that Chinese tariffs on American agricultural products remained in place. This gives China some weight in future trade negotiations. “

Commodity prices haven’t moved much since the deal was announced. At Monday’s trade close (Feb 3), soybean prices per bushel rose 4.5 cents to $ 8.77 in March futures trade. That number jumps to $ 8.90 in May futures trading. Both price points are within the trading range of the past few months.

China is the largest importer of soybeans, and the US soybean export market has collapsed since the start of the trade war. Trade experts warn that two factors could slow an increase in soybean imports into China. The country has been facing a severe African swine flu crisis that has killed millions of pigs and the country is still reeling from the spread of the coronavirus, according to Farm Progress.

Corn prices remained relatively low at the start of the trading week. March futures fell 2.5 cents to $ 3.78 a bushel, while May futures fell 2 cents to $ 3.84 a bushel.

Producers are still awaiting a third payment from the Market Facilitation Program. At the American Farm Bureau’s annual meeting, US Secretary of Agriculture Sonny Perdue said the third payment would be made shortly, but did not give a date.

The program began in 2018, intended to help farmers grapple with falling commodity prices and the growing trade dispute with China, in which the United States and China imposed tariffs on their exports. respective. In 2019, growers’ problems were compounded by severe weather-related crop losses. Stiles said many farmers depend on a third payment just to start planting in 2020.

“Considering plans were changed in 2019 due to weather – people couldn’t plant as much corn and rice as they expected – this seems like good options for expanding the acres this year “Stiles said.

With 2020 planting dates still to come and there is likely to be a lot of field work left in between, farmers in Arkansas are currently studying the safety net provisions of the 2018 Farm Bill. Producers have until March 15 to enroll base acres in either Price Loss Coverage or Farm Risk Coverage programs, both of which are part of the 2018 Farm Bill. The bill covers the 2019-2023 crop years .

The Farm Service Agency of the United States Department of Agriculture provides access to Farm Bill Decision Support Tools for ARC and PLC programs online at this link.

https://www.fsa.usda.gov/programs-and-services/arcplc_program/index


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