Ag leaders look to Southeast Asia for markets as China falls behind on crop purchases
With China unlikely to keep its crop-buying promises in its Phase One trade agreement with the United States, farmers are looking to Southeast Asia for new markets, agriculture leaders said July 30.
“We certainly see plenty of tensions between the United States and China and I think they all pool together to create a little bit of uncertainty.” said Jim Sutter, CEO of the U.S. Soybean Export Council.
“Our team in China reported to me overnight that the pace of purchases this week is less than it’s been the last couple of weeks,” Sutter told an online panel arranged by the Iowa Soybean Association and others. “The companies in China that are actively buying our new-crop soybeans are worried about what’s going to happen with this closing of consulates and other things being said that there could be a disruption in the implementation of the Phase One agreement.”
The U.S. and China in January entered the Phase One agreement in which tariffs were reduced in exchange for China pledging to buy more soybeans and other U.S. commodities. Relations between the two powers have since soured over alleged human rights violations in China, including its treatment of Hong Kong.
A biofuels authority agreed that trade talks are important now.
“It’s getting pretty hot in the kitchen out there on the trade side, as we all know,” said Craig Willis, senior vice president of global markets for biofuels trade group Growth Energy.
The key is seeking new markets, Willis said.
Brazil has an ethanol blend rate of about 47%, while the U.S. runs about 10%, Willis said. China had pledged that its fuel nationwide would be 10% ethanol by this year, but suspended that goal.
Much of the rest of the world blends an average of 1% ethanol, Willis said. That presents an opportunity.
“So if we could just simply take the rest of the world from a 1% blend rate to 10%, that’s 20 billion gallons of potential ethanol,” Willis added. Iowa’s 43 ethanol plants have the capacity to produce 4.5 billion gallons a year, mainly from corn.
The facilities have struggled to stay open as the COVID-19 pandemic led people to travel less, reducing demand. Also, farmers have fought against moves by the U.S. Environmental Protection Agency to grant waivers to refineries that don’t want to blend ethanol.
Other panelists said China’s trade fight with the United States has forced the U.S. to look at bolstering emerging markets.
“I want to call out three that have been real successes for us — Bangladesh, Pakistan and Egypt are markets where we see really good growth,” said Jim Sutter, CEO of the U.S. Soybean Export Council,, said the trade fight with China has forced discussions with other emerging trade partners.
At the same time, though, Brazil has moved to increase production of both soybeans and corn, Sutter and other panelists noted. That presents competition for U.S. farmers.
The South American giant has cleared more land by burning Amazonia rainforest, causing international controversy because of the possible effects of climate change and water quality.
And farmers are nervous.
“We have lost ground with regard to our competitors,” said Kevin Ross, president of the National Corn Growers Association.
Ross said he hopes to continue work to expand the market in Southeast Asia. “That is becoming a more concentrated position for us with trade agreements,” Ross said. “With the income levels there rising and the energy needs rising very fast in those countries, we think focusing in that area will be very key for us in corn exports.”
Mary Andringa, Vermeer board chairwoman, said the U.S.-Mexico-Canada Agreement “was a huge deal for Iowa.” She would like to see an expansion of the China agreement, perhaps with the help of U.S. Ambassador to China Terry Branstad, former governor of Iowa. She also would like to see revived talk of the Trans-Pacific Partnership, which the Trump administration shelved as too lucrative for other nations and too costly for the United States.
China has begun to buy more soybeans, but would need “scorching levels of buying” to hit its targets.