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Column: Soybeans lead U.S. farm exports to China to another monthly record

FORT COLLINS, Colo. (Reuters) - China’s strong return to the U.S. soybean market in recent months has single-handedly lifted U.S. farm exports to the Asian country to new records, and the heavy forward shipping schedule bodes well for the promises outlined in the Phase 1 trade agreement between the two countries.

A worker wearing a face mask works on a production line manufacturing soybean-based food products at a factory in Hefei, Anhui province, China February 4, 2020. China Daily via REUTERS

That agreement suggests China in 2020 will buy and import at least $36.5 billion worth of American agricultural products, an all-time high. Progress was relatively dismal through mid-year, but the narrative has since changed.

The United States in September shipped $3.13 billion worth of agricultural and related products to China, according to data published Wednesday by the U.S. Census Bureau.

That volume is 50% larger than the prior record for the month and is the most for any month since November 2017. It follows August’s monthly record of $2.15 billion.

Those records could not have been possible without the surge in soybean shipments. The oilseed accounted for 41% of the August value and 62% of the September one, the largest monthly share since November 2019.

The No. 2 August item was cotton, at 10% of the monthly value, and corn was September’s runner up at just 5% of the total, emphasizing just how strong of a role soybeans played.

The total tonnage of U.S. soybeans shipped to China between January and July hit a 16-year low for the period, significantly hampering China’s Phase 1 fulfillment. But after purchases picked up speed, some 7.5 million tonnes of U.S. beans set sail for the Asian country in August and September, nearly 70% more than the record for that timeframe.

The jump in soybean export costs to China padded September’s dollar value, lifting the year’s total closer to the promised amounts. That price in September averaged $380.10 per tonne ($10.34 per bushel), up 6% from August and the highest for any month since May 2018.

The same happened for corn as the September export price to China rose 6% over August to $171.60 per tonne ($4.36 per bushel). September’s U.S. corn tonnage to China was the second largest on record for any month, slightly below August’s high.

PORK AND BEEF

Pork and pork products in 2020 have boosted overall U.S. farm exports to China by a much larger degree than ever before, but the pace has dropped off. Pork accounted for a record 25% of the monthly exported value in February, but dropped to a 19-month low in September of 4%.

That can be partially explained by the 10% decline in export prices from April to September, but the volumes are also much lower. U.S. pork shipments to China reached 60,706 tonnes in September, well off the April high of 112,237 tonnes.

The September figure is a record for the month, but many market participants believed the larger volumes observed earlier in the year might be maintained given China’s huge protein deficit caused by African swine fever.

U.S. pork sales to China were relatively light through the first three weeks of October.

Annual U.S. beef exports to China through September were up 160% on the year to record levels. But despite an all-time high volume in September, beef shipments to the Asian country accounted for just 1% of the monthly dollar value, barely moving the needle in terms of Phase 1 goals.

China was the seventh largest destination for U.S. beef in September, accounting for 5% of the total.

TOTALS AND TERMINOLOGY

The U.S. Trade Representative and the Department of Agriculture a couple weeks ago released a joint report on U.S.-China trade progress citing that China had fulfilled 71% of the 2020 Phase 1 purchasing targets through early October.

That report relied heavily on the strong export sales of U.S. corn, soybeans and other bulk commodities to China on the books for the 2020-21 marketing year, so it is unclear if that estimate included cargoes that were likely to be shipped in calendar year 2021.

The Oct. 23 report also officially put the Feb. 14, 2020, enforcement date of the Phase 1 agricultural goals into print. That date as it pertains to farm purchases is not explicitly mentioned in the trade deal text, though officials had periodically hinted at it since the deal was signed in January.

Although an imperfect calculation, taking half of February’s export value and adding it with March through September puts the 2020 Phase 1 total at $11.9 billion, some 11% higher than in the same period in 2017. The same computation through June showed 2020 down 11% from 2017.

The trade agreement suggests that China’s 2020 U.S. farm purchases and imports would rise at least 50% over 2017 levels.

The January-September export value of U.S. agricultural products to China totaled $13.8 billion, down 4% from 2017 but up 28% on the year.

The opinions expressed here are those of the author, a market analyst for Reuters.

Editing by Leslie Adler

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