Farmers lauded the Trump administration’s announcement Friday of a potentially dramatic increase in agricultural sales to China, but quickly warned they need to see a follow-through of actual purchases.
Treasury Secretary Steven Mnuchin said the agricultural purchases could scale up to $40 billion or $50 billion annually as part of a partial trade deal, potentially more than doubling the $24 billion in agricultural and related products China purchased from the United States in 2017.
Farmers, who relied on China as the top buyer for soybeans and sorghum and a key market for pork and dairy, have seen their incomes plummet during the 15-month conflict of tit-for-tat tariffs between the world’s two largest economies.
“I’m excited,” said Monte Peterson, a farmer in Valley City, N.D., of the first phase of a deal. “That’s a pretty good announcement for U.S. ag.”
But it will be important for China to actually take delivery of farm products and not just announce purchases. “We have to see it loaded and shipped out,” he said.
Iowa’s Republican senators also praised the progress, but noted that same caveat.
“Any time progress is made, that’s good news,” Iowa Sen. Chuck Grassley said in a statement. “Farmers in Iowa know far too well that the trade war has caused real financial pain in the heartland. But we need to know more about this deal, and follow-through from China will be key.”
“No new tariffs on goods plus additional purchases of agricultural products, like Iowa soybeans and pork, is a good sign,” said a statement from Iowa Sen. Joni Ernst. ”I look forward to learning more details about this phase of the deal.”
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At a news conference after talks with Chinese Vice Premier Liu He, President Donald Trump joked that the partial deal meant farmers “are going to have to work a lot of overtime.”
Neither he nor Mnuchin gave details on which products China had promised to buy.
China imposed an additional 25 percent retaliatory tariff on U.S. soybeans in July 2018, resulting in piles of unsold U.S. crops and dragging prices to multiyear lows.
Trump has pledged a $28 billion bailout package to compensate farmers, who widely voted for him in 2016.
“Our farmers are resilient, but they need a long-term resolution to this trade war where U.S. soy can be imported into China by all importers without any retaliatory tariffs,” said Jim Sutter, chief executive of the Soybean Export Council industry trade group.
China mainly has relied on Brazil and Argentina for soybean imports it uses to feed livestock for nearly a year and a half, but the preliminary deal could shift trade to the United States.
China ramped up purchases of U.S. pork ahead of the trade talks in Washington, with the U.S. government reporting record-large weekly export sales Thursday. Millions of Chinese pigs have died from a deadly disease in recent months, sending China on a global pork buying spree.
Economist Bill Lapp, president of Advanced Economic Solutions of Omaha, was skeptical of the $50 billion figure.
“We’ve seen these big-dollar figures before, and they don’t always come to fruition,” he said.
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U.S. soybean prices climbed to the highest point since the start of the trade war ahead of the announcement Friday. Trump said it will take up to five weeks to get a written agreement.
“We are encouraged that both sides are at the negotiating table because it is important to reopen this market for American farmers,” commodity trader Cargill Inc. said in an emailed statement.
While Mnuchin told reporters Trump had agreed not to increase tariffs on $250 billion of Chinese goods to 30 percent from 25 percent, there was no mention of removing the tariffs Trump put in place more than a year ago.
Advocacy group Farmers for Free Trade said it was too soon to celebrate.
“The promise of additional ag purchases is welcome news but details on timeline, price, commodities and many other questions will have to be answered,” Brian Kuehl, co-executive director, said in a statement.