U.S. Wants China to Be a Customer, Not to Retaliate, Perdue Says

May 12, 2019 11:55 PM
Agriculture Secretary Sonny Perdue wants China to be a customer of American farm products, even after Washington hiked tariffs on more than $200 billion in Chinese goods.

(Bloomberg) -- Agriculture Secretary Sonny Perdue wants China to be a customer of American farm products, even after Washington hiked tariffs on more than $200 billion in Chinese goods, and said retaliation by Beijing would prompt the U.S. to boost support to its farmers.

“Our biggest goal will be for China not to retaliate and stay at the table to negotiate a good deal,” Perdue told Bloomberg News on Sunday, adding the U.S. will respond if China retaliates.

President Donald Trump said on Friday the U.S. will boost its purchases of domestic farm products for humanitarian aid in an effort to offset lost demand from China as trade tensions flare.

Perdue said he is working carefully on a plan and will submit it to the president within “a few days to a couple of weeks."

Trump said on Twitter the U.S. will use money coming in from the tariffs to buy American agricultural products “in larger amounts than China ever did” and send it to “poor & starving countries” for humanitarian aid. The president indicated potential purchases of $15 billion from farmers.

Large Stockpiles

Perdue said the implementation of the program will take time, as the U.S. has a large stockpile of grain and oilseed. The U.S. Department of Agriculture released its closely watched monthly crop outlook on Friday, issuing the first guidance on supply and demand for the upcoming season, and forecast rising domestic stockpiles.

Soybeans posted their biggest weekly loss in more than eight months in the week through May 10 as the USDA report exceeded analysts’ estimates for oilseed stocks. Corn also slumped as U.S. inventories were projected to swell to the most since the 1987-1988 season.

“I cannot say for sure right now when purchases of those kinds of products will take place,” Perdue said. “We have to look at the seasonality of all the crops across the spectrum and agree on which are hurt and damaged by China’s decisions.”

Perdue was in Niigata city in northern Japan to attend the Group of 20 farm ministers’ meeting. Japan, as the host of the gathering, urged other nations to lift restrictions on Japanese food imposed after the 2011 Fukushima nuclear disaster, as Prime Minister Shinzo Abe’s cabinet aims to boost agricultural exports to support rural communities. They also discussed ways to enhance agricultural productivity and the use of information technology for efficiency.

Trump said on Saturday it would be wise for China to “act now” to finish a trade deal with the U.S., predicting that “far worse” terms would be on offer after what he predicted would be his certain re-election in 2020.

U.S. Trade Representative Robert Lighthizer said the administration would on Monday release details of its plans for tariffs on an extra $300 billion of imports from China, setting the process in motion for Trump to deliver on his threat to hammer all Chinese trade.

The U.S. hiked tariffs on more than $200 billion in goods from China on Friday in the most dramatic step yet of Trump’s push to extract trade concessions, deepening a conflict that has roiled financial markets and cast a shadow over the global economy.

China immediately said in a statement it will be forced to retaliate, but didn’t specify how. The moves came as discussions between President Xi Jinping’s top trade envoy and his U.S. counterparts in Washington made little progress.

WTO Ruling

In 2018, the U.S. administration said it would deliver as much as $12 billion to farmers after Beijing slapped retaliatory tariffs on U.S. agricultural products. Last month, the World Trade Organization ruled that China didn’t follow proper procedures when it imposed trade restrictions on farm imports.

The U.S. government bought supplies from farmers in the 1980s after President Jimmy Carter’s ban on grain exports to the Soviet Union sent prices tumbling. The purchases were through the Commodity Credit Corporation -- an entity established in 1933 to stabilize, support and protect farm income as well as prices. Corn and wheat stockpiles wound up climbing to a record in the mid-80s.

American farmers are struggling to keep afloat after the tariff spat that started a year ago curbed soybean exports to top buyer China, sending prices tumbling and hurting grower incomes. A gauge of returns from grain futures is trading near its lowest since 1977 and farmer bankruptcies in six Midwest states rose 30% in 2018, according to the Federal Reserve Bank of Minneapolis.


©2019 Bloomberg L.P.

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Spell Check

Coon Rapids, IA
5/13/2019 10:58 AM

  I started farming in 1979 and survived the 80's. Was tough making ends meet, but we did it somehow. I am in my 60's now and this is tough. You guys on here make alot of sense about whats going on. Lets hope all of us can find a way to get through this and have better times. Good luck to all farmers with this mess we are in.

Douglas Street
Newton , KS
5/12/2019 10:22 PM

  According to recent WASDE, China owns 2/3 of the world's corn carryover, followed by the USA with 1/6. The rest of the world apparently manages their corn needs / production in line with imports / exports, and they own the remaining 1/6 of world corn carryover. On the wheat side, China owns about 1/2 of the world's carryover, USA has about 1/9 (30 mmt). The rest of the major wheat producing / exporting countries (Russia, Canada, Ukraine, Australia, Argentina), produce about 166 mmt (23%), and carryover a meager 21 mmt (8%). Again, many other countries manage better. Maybe the USA farmers could get together and cut production of some crops / product. Graze more cattle (our grandfathers used to), plant more cover crops to graze or hay, cut some inputs, pay less rent, manage crop rotations better. Maybe the USDA could come up with a system to reward those that cut production with an improved crop insurance premium program. And erosion is getting way out of hand. Maybe Trump will fix it for us. Programs to get small, independent farmers started. If a country needs some product, then sell it to them. If USA needs some product, then buy it or produce it ourselves. What good does it do to force a country to buy our surplus ag product while they have no need for it. Or better yet, they just manage better. The USA has a glut of nearly everything. Get those carryovers down with good management, and produce at a profit. Get the government out of our business. Let's quit subsidizing the biggest, most prosperous farmers, especially those that are doing the most to overproduce. Sanctions, quotas, blockades, tariffs rarely bring good results or good will. When we can get those carryovers down, profits happen!

Greensburg , IN
5/13/2019 06:58 AM

  The last thing we need as farmers of any size is another government program to manage supply. Current gov't programs are a BIG part of the reason the supply/demand imbalances occur now. For example, because POTUS just announced USDA is working on another Tariff Relief Payment Program (likely big for soybeans) I, and I suspect many other farmers are considering planting more soybeans, because current Nov futures plus $1.50 -$2.00 per bushel from Trump doesn't look to bad. Add in a big crop insurance payment (ARP is already paying big with average yields) and I may just retire after this season. Do we need the beans? Hell no! But I'm going to do it anyway because that's what the Gov't programs are encouraging me to do. If it weren't for last years Tariff Relief Payments many farmers on the fringes of the corn belt would not be planting as many bean now. 2019 Soybean acreage would be a lot less and the over supply would start to take care of itself. Don't forget another huge reason the over-supply is what it is, is Trump's tariffs on China. Government intervention at its worst. Government needs to Protect our Borders, keep the courts open and honest, and fix the roads and bridges. Let the free market forces handle the rest!!


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