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Column: U.S. farm exports to China hit new August record thanks to soybeans

FORT COLLINS, Colo. (Reuters) - U.S. agricultural exports to China had a sluggish start to 2020 relative to the lofty expectations set forth by the Phase 1 trade agreement, but the August value soared substantially over that of the prior months owing to strong soybean shipments.

Workers transport imported soybean products at a port in Nantong, Jiangsu province, China April 9, 2018. REUTERS/Stringer/File Photo

U.S. cotton exports to China hit a seven-and-a-half-year high in August, while corn shipments to the Asian country reached an all-time record. But the combined export value of cotton and corn, the No. 2 and 3 items in August, was less than half that of soybeans, emphasizing the importance of the oilseed in the trade relationship.

According to data published on Tuesday by the U.S. Census Bureau, the United States in August shipped $2.15 billion in agricultural and related products to China, topping the 2012 record for the month by 19%.

That speaks to sheer volume of items being shipped given the price difference between 2012 and 2020. The August 2012 export prices of U.S. soybeans, cotton and corn to China were between 50% and 85% higher than in this year.

The actual August tonnage of soybeans to China missed last year’s record for the month, falling 11% to 2.45 million tonnes. But that is more than was shipped in the previous six months combined and is the second-highest August volume to China.

The strong soybean performance is primarily what bolstered the record August. Soybeans accounted for 41% of all U.S. farm goods shipped to China in August, the best since January’s 52%.

Soybeans’ share was 19% or lower between February and July, which was close to normal for the later months but sharply below normal in the earlier ones. That explains why U.S. farm exports to China were so dismal versus average earlier in 2020, then recovered to above-average levels as the year progressed.

It also continues to support the critical role of soybeans in U.S. agricultural trade with China. Despite recent record exports of other farm products, the overall effort is dragged down when soybean exports are weak, and vice versa.

IMPROVED 2020

The Phase 1 trade agreement signed back in January suggested China would buy and import at least $36.5 billion worth of U.S. farm products in 2020, around 50% more than three years earlier.

Through August, the 2020 total stood at $10.7 billion, some 13% below the same point in 2017 but up on the past two years. The deficit versus 2017 had been 21% in July, 31% in May, and 47% in March.

U.S. officials have hinted that enforcement of the Phase 1 deal for agriculture began in mid-February, despite the language in the actual agreement suggesting otherwise.

Although it is not a perfect calculation, half of February’s value plus March-August totaled $8.8 billion, up nearly 1% on the same period in 2017 but still far off the 50% improvement target.

Soybeans accounted for 22% of January-August U.S. agricultural shipments to China, pork and pork products accounted for 15%, and forest products rounded out the top three at 10%. Cotton was a very close fourth, also at 10%.

During the same period in 2017, the soybean share was 36%, forest products 17%, and fish products 6%. Cotton was again a close fourth with 6%.

STRONG SEPTEMBER

Progress toward the Phase 1 trade deal should have advanced in September given the flurry of U.S. soybean and corn cargoes that set sail to China.

Export inspection data suggests that U.S. soybean shipments to China in September smashed the month’s record, likely surpassing 4 million tonnes and potentially notching the largest volume for any month since November 2017.

U.S. soybean shipments to all destinations in September should have reached the highest level for any month outside October-January, the peak of export season.

The United States sent 1.18 million tonnes of corn to China in August, topping the all-time high for any month set in October 1995 of 951,600 tonnes. Inspection data implies the September total came in close to August.

In August, U.S. soybean exports to China were valued at $881 million, cotton at $215 million, and corn at $190 million. Cotton shipments to China totaled 154,024 tonnes in August, the most for any month since March 2013.

Pork was an August laggard, however. U.S. shipments to the Asian country in August totaled 59,922 tonnes, record for the month but down 14% from July to a 10-month low. Pork and pork products in August accounted for 6% of U.S. farm exports to China, the smallest share since March 2019.

September pork shipments were likely similar to those in August.

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

Editing by Matthew Lewis

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