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Joe GlauberNick Paulson
Nick Paulson and Joe Glauber on Ag Trade
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Joe GlauberNick Paulson
Nick Paulson and Joe Glauber on Ag Trade
Nick Paulson
If production or other supply chain issues related to covid-19 create potential domestic shortages, should the government intervene to limit meat exports?
o Yes, exports should be stopped
o Yes, exports should be partially limited
o No, exports should continue
o I don’t know
Importance of Ag Export MarketsExport Share of US Production, 2017/18
78%
55%52%
48%
29%
17%10% 11%
17%22%
0%
25%
50%
75%
100%
Cotton Sorghum Wheat Soybeans Soy Meal Corn Soy Oil Beef Chicken Pork
Source: PS&D , FAS-USDA
43,817
36,000
33,500
32,000
16,412
4,200
61,916
24,154
22,473
18,036
16,127
5,532
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000
US
Brazil
Argentina
Ukraine
ROW
Russia
Source: PS&D , FAS-USDA
World Export Market Competition
CornWorld Exports
(1000 MT) 2017 vs 2019f
41%
26%
78,500
48,308
8,200
6,290
5,900
4,300
76,136
58,071
2,132
5,783
6,029
4,925
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000
Brazil
US
Argentina
ROW
Paraguay
Canada
Source: PS&D , FAS-USDA
World Export Market Competition
SoybeansWorld Exports
(1000 MT) 2017 vs 2019f
37%
31%
49%
51%
45,406
33,500
33,500
26,807
23,000
20,500
53,228
41,431
23,383
24,655
22,000
17,775
0 10,000 20,000 30,000 40,000 50,000 60,000
ROW
Russia
EU
US
Canada
Ukraine
Source: PS&D , FAS-USDA
World Export Market Competition
WheatWorld Exports
(1000 MT) 2017 vs 2019f
29%
25%
13%
15%
15,000
11,339
8,600
3,300
1,200
1,200
16,279
10,734
4,174
5,182
3,915
1,300
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000
US
ROW
Brazil
India
Australia
Mali
Source: PS&D , FAS-USDA
World Export Market Competition
CottonWorld Exports
(1000 bales)2017 vs 2019f
37%
35%
3% 4% 4% 9% 9% 9% 10% 10% 12% 15% 18% 17% 22% 22% 20% 18% 20% 18% 9% 12%
169
154
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018China ROW
US Ag and Ag-Related Exports by Year and Value$
Billi
ons
Rest of the World
China
2017 BaselineUS Exports to China:$19.5 billion ag$24 billion ag and ag-related
Value-based commitmentsIncrease of $12.5b in 2020Increase of $19.5b in 2021
ChallengesLarge commitments“Market conditions”Strong dollarCovid-19
Phase 1 Agreement with China
$12,224
$3,193
$1,232 $978 $945 $838 $662 $576 $351 $340
$0
$2,500
$5,000
$7,500
$10,000
$12,500
Soybeans ForestProducts
FishProducts
Cotton Hides &Skins
CoarseGrains (ex.
corn)
Pork & PorkProducts
DairyProducts
Wheat Hay
$ m
illio
nWhat Will China Buy?US Agricultural Exports to China in 2017: Top 10 by Value
$267
$243
$226
$162
$142 $139
$134
$131
$117
$86
$83 $62
$42
$36 $34
$34
$31 $30
$27
$25
$24
$0 $50 $100 $150 $200 $250 $300
Feeds & FoddersTree Nuts
Fresh FruitTobacco
CornPrepared Food
Processed FruitPlanting Seeds
Processed VegetablesWine & Beer
EthanolDistillers Grains
Veg Oils (ex. soybean)Poultry (ex. eggs)
Snack FoodsNon-Alc Bev. (ex. juices)
Beef & Beef ProductsBreakfast Cereals
Chocolate & Cocoa ProductsPulses
Soybean Oil
$ million
What Will China Buy?US Agricultural Exports to China in 2017Next 21 by Value
Will China meet their Phase 1 import commitments for US ag products in 2020?
o Yes, commitments will be met
o No, but purchases will be above 2017 levels
o No, and purchases will be below 2017 levels
o I don’t know
Joe GlauberSenior Research Fellow at IFPRI
Outline
China and Phase 1
Prospects post-covid-19
Issues
US agricultural trade152
140
0
20
40
60
80
100
120
140
160
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020fFiscal year
Source: USDA/FAS, GATS
Billion USD
US agricultural trade to China
26
22
10
14
0
5
10
15
20
25
30
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020f
Billion USD
Source: USDA/FAS, GATS
Phase 1 agreementCh. 3 Trade in Food and Agricultural Products
• Addresses NTBs affecting a wide range of productions– dairy and infant formula– poultry, beef, and pork products– pet food
• Compliance with WTO ruling on domestic support and TRQ administration (wheat, corn, rice)
• Speed and streamline biotech approval process
Phase 1 agreementCh. 6 Expanding Trade => ag imports
• $12.5 billion above 2017 baseline in 2020
• $19.5 billion above 2017 baseline in 2021
• purchases will be made at market prices based on commercial considerations and that “market conditions…may dictate the timing of purchases”
Phase 1: questions• What is meant by agricultural products?
– Seafood, distilled spirits, ethanol, processed food and wine
• Commitments are value not volume based.
• What is the baseline? – Calendar 2017 ag products ~$21 billion, with seafood, ethanol & distilled spirits– Agreement considers baseline at $24 billion
• How valued?– US exports valued fob US– China imports valued cif China– Agreement will use data from both China and US to monitor
FAPRI: Effects of Phase 1 on exports to ChinaDifference from 2017
Source: FAPRI, 2020 Baseline
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
Corn Soybeans Wheat Sorghum DDGS
2019/20 2020/21 2021/22
Thou
sand
Met
ric To
ns
FAPRI: Effects of Phase 1 on exports to ChinaDifference from 2017
Source: FAPRI, 2020 Baseline
0
100
200
300
400
500
600
700
Pork Beef Poultry
2020/21 2021/22
Thou
sand
Met
ric To
ns
FAPRI: Impact on total US soybean exports
490 1,534 490 1,561
1,402 423 1,423 427
0
500
1,000
1,500
2,000
2,500
No deal Phase 1 No deal Phase 1
2020/21 2021/22
Million bu
Rest of World
China
FAPRI: Effects of Phase 1 on Net Farm Incomein Billion Dollars
2020 2021 2022
No deal 98.9 94.9 92.5
Phase 1 105.9 102.0 98.6
Difference 7.0 7.1 6.1
Source: FAPRI 2020 baseline
Still early but sales are lagging…• For Q1, China reports ag product imports of $5 billion
(import value). Need about 2x that value in each quarter Q2, Q3, and Q4 to reach target of $36.5 billion
• Encouraging sales of pork, cotton, wheat, corn and sorghum, but pace is very slow
• Soybean export pace lagging and won’t likely pick up until late summer
Soybean Total Commitments(outstanding sales + shipments)
0
10
20
30
40
50
60
70
1 5 9 13 17 21 25 29 33 37 41 45 49 53
Mill
ion
Met
ric T
ons
Source: USDA/FAS Export Sales Week Number
2018/19
2015/16
2016/17
2014/15
2017/18
2019/20
Impacts of Covid-19 on trade
Impacts of Covid-19• Direct impact on health
– Farm labor (F&V production, dairies)– Meat processing
• Impact of containment policies– Closure of non-essential businesses– Shelter in place policies– Impact on motor vehicle fuel use– Disruption of supply chains; increased costs– Rising retail prices as producer prices fall
• Recessionary impacts on income
Decline in global goods trade: 2009 vs 2008 levels
-12.1%
-35.8%
-19.9%
-1.8%
-5.4%
-15.3%
-40%
-30%
-20%
-10%
0%Agricultural products Fuels and mining products Manufactures
ValueVolume
Source: WTO, World Trade Statistical Review, 2019
IMF forecasts2019 2020f 2021f
World output 2.9 -3.0 5.8Advanced economies 1.7 -6.1 4.5US 2.3 -5.9 4.7
Emerging Markets 3.7 -1.0 6.6China 6.1 1.2 9.2India 4.2 1.9 7.4Brazil 1.1 -5.3 2.9Mexico -0.1 -6.6 3.0
Global trade 0.9 -11.0 8.4Source: IMF WEO, April 2020
WTO: Estimated global GDP impacts
Scenario Work at home 2020 2021V shape 3 months -4.8% 4.2%U shape 6 months -9.2% 8.1%L shape 12 months -11.1% 2.8%
Source: WTO April 2020Time
GDP
Estimated impact of covid-19 on global trade in 2020 given various recovery scenarios
-6.5 -7.4 -8.2 -8.1
-11.2-12.6
-20.7
-16.5
-12.7 -13.4
-30
-20.4
-30
-20
-10
0Agricultural products Processed foods Manufacturing goods Total
V shape
U shape
L shape
Source: WTO April 2020
Perc
ent
Issues and challenges• Implementation of USMCA
• China– Implementation of Phase 1– Phase 2 negotiations
• US-Japan negotiations Phase 2
• US-EU negotiations
• Brexit
• WTO – Fate of dispute settlement– US ag won over 80% of
cases it has taken to WTO– Export restrictions on rise
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Upcoming WebinarsImpact of the Coronavirus Pandemic on Livestock Markets11:00 to 11:45am CT, Friday May 1st
The impact of the coronavirus pandemic on livestock markets continues to unfold and place substantial stress on livestock producers. Lee Schulz of Iowa State University joins Todd Hubbs to discuss the impacts and outlook for markets.
US-China Agricultural Trade and Shifting Consumption Patterns in China11:00 to 11:45am CT, Tuesday May 5th
Over the past two years, policy actions have had major impacts on trade in agricultural products between the US and China. In addition, shifts in the consumption patterns are changing the demand for agricultural products by Chinese consumers. Nick Paulson will be joined by Wendong Zhang, assistant professor in Agricultural Economics at Iowa State University, for a discussion of these issues and how they impact the outlook for U.S. agricultural exports.
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