China is proposing that it could buy an additional $30 billion a year of U.S. agricultural products including soybeans, corn and wheat as part of a possible trade deal being negotiated by the two countries, according to people with knowledge of the plan. The offer to buy the extra farm produce would be part of the memoranda of understanding under discussion by U.S. and Chinese negotiators in Washington, according to the people, who asked not to be identified because the plans are confidential. The purchases would be on top of pre-trade-war levels and continue for the period covered by the memoranda, they said.
U.S. Agriculture Secretary Sonny Perdue said it was “premature” to comment on what or how much China might buy as part of a trade deal.
“I don’t want to raise expectations,” he told reporters attending the department’s annual outlook conference in Washington Thursday.
“If we reach an agreement on structural reforms we can recover markets very, very quickly.”
As part of the talks, officials are planning to discuss removing anti-dumping and anti-subsidy tariffs on distillers dried grains, a byproduct of corn ethanol production used in animal feed, people said earlier.
Soybeans, corn and wheat futures prices rose in Chicago in response.
“China will say what needs to be said to get a deal, but the key component will be in the verification and enforcement,” Arlan Suderman, chief commodities economist for INTL FCStone, said in a note.
“I remain skeptical that such a deal will ‘fix’ the soybean balance sheet, without specific very large purchase quotas that I do not expect. However, it would not require very large purchase of corn, ethanol and DDGS to significantly improve the corn balance sheet.”
China has repeatedly offered to increase purchases of agricultural and energy products to shrink the U.S. trade deficit.
Since a tariff truce agreed in December, it has resumed imports of some farm goods including soybeans and U.S. President Donald Trump this week said “a lot of” corn would be next on Beijing’s shopping list.
The memorandums of understandings under discussion are also said to cover areas including nontariff barriers, services, technology transfer and intellectual property. The enforcement mechanism is unclear, but would likely be a threat that tariffs would be reimposed if conditions aren’t met, a person said.
Nobody responded to a fax sent to China’s Commerce Ministry late Thursday. Ministry spokesman Gao Feng said at a briefing earlier he had no details regarding any memorandums being discussed with the U.S.
He said he couldn’t offer any information on the results of the talks until the current round ends.
In 2017, China imported a total $24.2 billion in U.S. agricultural products, with 60 percent of that in oilseeds and the remaining in products such as meat, cotton, cereals and seafood. Combined purchases slumped by a third last year as China’s retaliatory tariffs on U.S. farm goods reduced imports.
“The bounce in Brazil and Argentina prices this week leaves the U.S. in good position to attract demand from China if there are no tariffs,” Terry Roggensack, one of the founding principals of commodity research company Hightower Report, wrote in a note Thursday.
If there is no deal between the U.S. and China, Brazil and Argentina would be expected to capture the market to serve Chinese demand, and the U.S. would sell more elsewhere, USDA chief economist Robert Johansson said.