AMES, Iowa — With planting season just weeks away, news of the coronavirus has farmers wondering what to expect in the marketplace and how it might impact the recently announced phase one trade deal with China.
China has agreed to buy $12.5 billion in U.S. agricultural products in 2020, and $19.5 billion more in 2021. But recent world events have caused uncertainty as to when those shipments will begin, and whether the targets will be met, said Wendong Zhang, an assistant professor and Extension economist with Iowa State University.
“The farmers are hopeful, but they want to understand how the phase one deal will impact their income and export potential, and the coronavirus adds significant uncertainty,” Zhang said in an Extension news release.
In an article for The Conversation, an independent and nonprofit source of news analysis from academic experts, Zhang says China can still make the purchases noted in the deal, at least for the year 2020, but current events will make doing so more challenging.
“A resilient and recovering Chinese economy means the country can comply with the trade deal and potentially minimize damage to the U.S. economy from an ongoing trade war,” according to the article, which adds, “Make no mistake. These disruptions have been profound.”
New restrictions in China and the U.S. have led to significant reductions in Chinese imports, with the possibility that the start date for phase one could be pushed back to next April or May. The rapid global spread of coronavirus makes Chinese buyers even more cautious regarding overseas personnel and cargo flows, Zhang said.
In the article, written with Tao Xiong, professor of agricultural economics at China’s Huazhong Agricultural University and a visiting scholar at the Iowa State Center for Agricultural and Rural Development, the authors say another factor affecting trade is market prices. The deal allows Chinese agricultural purchases to be based on market prices and commercial considerations, rather than purchase targets or commodity- specific purchase contracts.
Zhang said there is reason for U.S. producers to be optimistic, including China’s own virus recovery and increased demand for pork due to the effects of African swine fever.
“Once life returns to normal, as the coronavirus outbreak slows globally, I think the orders and shipments will slowly ramp up. But the coronavirus will definitely be a hard hit,” Zhang said.