nick paulson and joe glauber on ag trade - farmdoc€¦ · us ag and ag-related exports by year and...

Joe GlauberNick Paulson

Nick Paulson and Joe Glauber on Ag Trade

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Joe GlauberNick Paulson

Nick Paulson and Joe Glauber on Ag Trade

Nick Paulson

If production or other supply chain issues related to covid-19 create potential domestic shortages, should the government intervene to limit meat exports?

o Yes, exports should be stopped

o Yes, exports should be partially limited

o No, exports should continue

o I don’t know

Importance of Ag Export MarketsExport Share of US Production, 2017/18

78%

55%52%

48%

29%

17%10% 11%

17%22%

0%

25%

50%

75%

100%

Cotton Sorghum Wheat Soybeans Soy Meal Corn Soy Oil Beef Chicken Pork

Source: PS&D , FAS-USDA

43,817

36,000

33,500

32,000

16,412

4,200

61,916

24,154

22,473

18,036

16,127

5,532

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

US

Brazil

Argentina

Ukraine

ROW

Russia

Source: PS&D , FAS-USDA

World Export Market Competition

CornWorld Exports

(1000 MT) 2017 vs 2019f

41%

26%

78,500

48,308

8,200

6,290

5,900

4,300

76,136

58,071

2,132

5,783

6,029

4,925

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

Brazil

US

Argentina

ROW

Paraguay

Canada

Source: PS&D , FAS-USDA

World Export Market Competition

SoybeansWorld Exports

(1000 MT) 2017 vs 2019f

37%

31%

49%

51%

45,406

33,500

33,500

26,807

23,000

20,500

53,228

41,431

23,383

24,655

22,000

17,775

0 10,000 20,000 30,000 40,000 50,000 60,000

ROW

Russia

EU

US

Canada

Ukraine

Source: PS&D , FAS-USDA

World Export Market Competition

WheatWorld Exports

(1000 MT) 2017 vs 2019f

29%

25%

13%

15%

15,000

11,339

8,600

3,300

1,200

1,200

16,279

10,734

4,174

5,182

3,915

1,300

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

US

ROW

Brazil

India

Australia

Mali

Source: PS&D , FAS-USDA

World Export Market Competition

CottonWorld Exports

(1000 bales)2017 vs 2019f

37%

35%

3% 4% 4% 9% 9% 9% 10% 10% 12% 15% 18% 17% 22% 22% 20% 18% 20% 18% 9% 12%

169

154

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018China ROW

US Ag and Ag-Related Exports by Year and Value$

Billi

ons

Rest of the World

China

2017 BaselineUS Exports to China:$19.5 billion ag$24 billion ag and ag-related

Value-based commitmentsIncrease of $12.5b in 2020Increase of $19.5b in 2021

ChallengesLarge commitments“Market conditions”Strong dollarCovid-19

Phase 1 Agreement with China

$12,224

$3,193

$1,232 $978 $945 $838 $662 $576 $351 $340

$0

$2,500

$5,000

$7,500

$10,000

$12,500

Soybeans ForestProducts

FishProducts

Cotton Hides &Skins

CoarseGrains (ex.

corn)

Pork & PorkProducts

DairyProducts

Wheat Hay

$ m

illio

nWhat Will China Buy?US Agricultural Exports to China in 2017: Top 10 by Value

$267

$243

$226

$162

$142 $139

$134

$131

$117

$86

$83 $62

$42

$36 $34

$34

$31 $30

$27

$25

$24

$0 $50 $100 $150 $200 $250 $300

Feeds & FoddersTree Nuts

Fresh FruitTobacco

CornPrepared Food

Processed FruitPlanting Seeds

Processed VegetablesWine & Beer

EthanolDistillers Grains

Veg Oils (ex. soybean)Poultry (ex. eggs)

Snack FoodsNon-Alc Bev. (ex. juices)

Beef & Beef ProductsBreakfast Cereals

Chocolate & Cocoa ProductsPulses

Soybean Oil

$ million

What Will China Buy?US Agricultural Exports to China in 2017Next 21 by Value

Will China meet their Phase 1 import commitments for US ag products in 2020?

o Yes, commitments will be met

o No, but purchases will be above 2017 levels

o No, and purchases will be below 2017 levels

o I don’t know

Joe GlauberSenior Research Fellow at IFPRI

Outline

China and Phase 1

Prospects post-covid-19

Issues

US agricultural trade152

140

0

20

40

60

80

100

120

140

160

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020fFiscal year

Source: USDA/FAS, GATS

Billion USD

US agricultural trade to China

26

22

10

14

0

5

10

15

20

25

30

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020f

Billion USD

Source: USDA/FAS, GATS

Phase 1 agreementCh. 3 Trade in Food and Agricultural Products

• Addresses NTBs affecting a wide range of productions– dairy and infant formula– poultry, beef, and pork products– pet food

• Compliance with WTO ruling on domestic support and TRQ administration (wheat, corn, rice)

• Speed and streamline biotech approval process

Phase 1 agreementCh. 6 Expanding Trade => ag imports

• $12.5 billion above 2017 baseline in 2020

• $19.5 billion above 2017 baseline in 2021

• purchases will be made at market prices based on commercial considerations and that “market conditions…may dictate the timing of purchases”

Phase 1: questions• What is meant by agricultural products?

– Seafood, distilled spirits, ethanol, processed food and wine

• Commitments are value not volume based.

• What is the baseline? – Calendar 2017 ag products ~$21 billion, with seafood, ethanol & distilled spirits– Agreement considers baseline at $24 billion

• How valued?– US exports valued fob US– China imports valued cif China– Agreement will use data from both China and US to monitor

FAPRI: Effects of Phase 1 on exports to ChinaDifference from 2017

Source: FAPRI, 2020 Baseline

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

Corn Soybeans Wheat Sorghum DDGS

2019/20 2020/21 2021/22

Thou

sand

Met

ric To

ns

FAPRI: Effects of Phase 1 on exports to ChinaDifference from 2017

Source: FAPRI, 2020 Baseline

0

100

200

300

400

500

600

700

Pork Beef Poultry

2020/21 2021/22

Thou

sand

Met

ric To

ns

FAPRI: Impact on total US soybean exports

490 1,534 490 1,561

1,402 423 1,423 427

0

500

1,000

1,500

2,000

2,500

No deal Phase 1 No deal Phase 1

2020/21 2021/22

Million bu

Rest of World

China

FAPRI: Effects of Phase 1 on Net Farm Incomein Billion Dollars

2020 2021 2022

No deal 98.9 94.9 92.5

Phase 1 105.9 102.0 98.6

Difference 7.0 7.1 6.1

Source: FAPRI 2020 baseline

Still early but sales are lagging…• For Q1, China reports ag product imports of $5 billion

(import value). Need about 2x that value in each quarter Q2, Q3, and Q4 to reach target of $36.5 billion

• Encouraging sales of pork, cotton, wheat, corn and sorghum, but pace is very slow

• Soybean export pace lagging and won’t likely pick up until late summer

Soybean Total Commitments(outstanding sales + shipments)

0

10

20

30

40

50

60

70

1 5 9 13 17 21 25 29 33 37 41 45 49 53

Mill

ion

Met

ric T

ons

Source: USDA/FAS Export Sales Week Number

2018/19

2015/16

2016/17

2014/15

2017/18

2019/20

Impacts of Covid-19 on trade

Impacts of Covid-19• Direct impact on health

– Farm labor (F&V production, dairies)– Meat processing

• Impact of containment policies– Closure of non-essential businesses– Shelter in place policies– Impact on motor vehicle fuel use– Disruption of supply chains; increased costs– Rising retail prices as producer prices fall

• Recessionary impacts on income

Decline in global goods trade: 2009 vs 2008 levels

-12.1%

-35.8%

-19.9%

-1.8%

-5.4%

-15.3%

-40%

-30%

-20%

-10%

0%Agricultural products Fuels and mining products Manufactures

ValueVolume

Source: WTO, World Trade Statistical Review, 2019

IMF forecasts2019 2020f 2021f

World output 2.9 -3.0 5.8Advanced economies 1.7 -6.1 4.5US 2.3 -5.9 4.7

Emerging Markets 3.7 -1.0 6.6China 6.1 1.2 9.2India 4.2 1.9 7.4Brazil 1.1 -5.3 2.9Mexico -0.1 -6.6 3.0

Global trade 0.9 -11.0 8.4Source: IMF WEO, April 2020

WTO: Estimated global GDP impacts

Scenario Work at home 2020 2021V shape 3 months -4.8% 4.2%U shape 6 months -9.2% 8.1%L shape 12 months -11.1% 2.8%

Source: WTO April 2020Time

GDP

Estimated impact of covid-19 on global trade in 2020 given various recovery scenarios

-6.5 -7.4 -8.2 -8.1

-11.2-12.6

-20.7

-16.5

-12.7 -13.4

-30

-20.4

-30

-20

-10

0Agricultural products Processed foods Manufacturing goods Total

V shape

U shape

L shape

Source: WTO April 2020

Perc

ent

Issues and challenges• Implementation of USMCA

• China– Implementation of Phase 1– Phase 2 negotiations

• US-Japan negotiations Phase 2

• US-EU negotiations

• Brexit

• WTO – Fate of dispute settlement– US ag won over 80% of

cases it has taken to WTO– Export restrictions on rise

Thanks and be safe!Joe Glauber

j.glauber@cgiar.org

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