Friday, June 05, 2020

U.S.-China farm trade deal is in doubt after dispute over Hong Kong, Chinese cuts in soybean and pork purchases

The future of the "Phase 1" trade deal between the United States and China is in question after recent actions by the two governments, Karl Plume, Hallie Gu, and Keith Zhai report for Reuters.

In January, the countries signed a partial deal in which China promised to increase purchases of U.S. farm products by $32 billion over two years, if that didn't disrupt China's other trade relationships. China was once the U.S.'s top customer for soybeans, but lately China has been buying big from Brazil, Keith Johnson reports for Foreign Policy.

China recently passed a national-security bill that effectively overrode Hong Kong's legislature, giving Beijing more control over the city. In response, President Trump said Friday that the administration will begin eliminating policy exemptions for Hong Kong on extradition, technology exports and more, Jonathan Garber reports for Fox Business.

China volleyed back by canceling some U.S. agriculture purchases, weakening U.S. corn, wheat and lean hog futures; soybean futures remained flat. Sources with insider knowledge said the Chinese government told state-owned companies to stop making large-scale soybean and pork purchases from the U.S.; one of the sources said corn and cotton purchases were also on the chopping block, Reuters reports. But after that order, state-owned Chinese firms bought at least 180,000 tons of U.S. soybeans on Monday, scheduled to ship in the fall when U.S. soybeans are usually the cheapest on the global market, said three U.S. traders familiar with the deal.

"It was not immediately clear why buying continued after Beijing’s message to state-owned firms, but U.S. traders said Chinese importers still have not covered a large share of October and November soybean needs, Reuters reports. "The soybean sales on Monday were small compared to recent purchases by state-owned firms totaling 1 million tonnes or more at a time."

"Any sustained halt in buying would further threaten progress in meeting goals set in the Phase 1 trade deal signed in January," Reuters reports.

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