The U.S.-China relations are at a low point, but China on Thursday made its biggest-ever U.S. corn order, putting a small dent in the roughly $10 billion in agricultural purchases it owes the U.S. as part of the trade deal.
On Thursday, the U.S. Department of Agriculture reported its largest-ever daily corn selloff to China, recording that China had purchased 1.94 million tonnes of corn in a single day. It marked the third-largest one-day U.S. corn purchase from any country since1977, overtaking China’s previous record purchase of 1.86 million tonnes, which it made two weeks ago.
China is on an American corn-buying spree at a time when China’s agricultural purchases from the U.S. could help smooth over what’s an otherwise rocky relationship between the two powers that are feuding over the coronavirus, human rights, and territorial claims in the South China Sea.
In January, the U.S. and China signed the Phase 1 trade deal, an agreement that sought to initiate an end the two-year-long trade war. As part of the deal, China agreed to purchase $36.6 billion in agricultural goods from the U.S. in 2020.
On July 28, the Peterson Institute for International Economics published a study indicating that through June, China lagged far behind in its crop-buying commitment. PIIE found that China had imported $8.7 billion worth of agricultural imports from the U.S., far below the roughly $18 billion it would have needed to stay on pace to meet its year-end target.
The United States Department of Agriculture did not specify how much China paid for its Thursday purchase; recent export prices peg the cost of 1.94 million tonnes of corn at nearly $300 million.
China’s recent corn splurges represent progress toward its 2020 goal, but the purchases may have as much to do with meeting domestic demand as they do with fulfilling the trade deal.
In China, domestic corn prices are climbing, a delayed effect of China’s 2016 decision to cut a farming subsidy program, the Wall Street Journal reports. That year, the Chinese government ended its price-guarantee program for corn farmers, which propped up the industry and allowed farmers to stockpile large quantities of corn.
China’s corn supply now appears to be running out just as demand for it is on the rise.
Beginning in 2018, an outbreak of African Swine Fever devastated China’s hog population, killing roughly half of all pigs. Now, hog stocks appear to be bouncing back. Chinese state media reports that Chinese farms have more than 5 million more pigs than they had at the beginning of the year. In total, Xinhua, a media outlet, estimates hog stocks in China are now at 81% of pre-swine fever levels. The increase in pigs means a rising demand for corn, which is used as feed.
In the U.S., China’s corn orders are what matters, regardless of the rationale. U.S. farmers, who represent a vital voting base for President Donald Trump and were hard hit by the trade war, are on the receiving end of those purchases. In that regard, China’s corn orders reflect well on Trump and his administration, even if he escalates his anti-China rhetoric elsewhere.