The first phase of the U.S. trade deal with China has resulted in the higher demand for wheat that farmers were hoping for, a U.S. Wheat Associates analyst says.
“What we really wanted out of an agreement with China was for China to play by the rules they agreed to and have a situation where they could buy from the U.S. without retaliatory tariffs in place,” said Dalton Henry, vice president of policy for U.S. Wheat, the overseas marketing arm for the industry. “We’ve gotten to that place on both of those.”
Since the Phase 1 trade deal was signed in January, China has purchased nearly 2 million tons of wheat from the U.S. The five-year average prior to the trade war the past few years was about 1.5 million tons, Henry said.
“It’s been really good to be back in the China market,” he said.
This year, China purchased hard red winter wheat and soft red winter wheat. Soft white wheat, a class of wheat primarily grown in the Pacific Northwest, typically is purchased by private mills early in the year, Henry said.
China is likely to limit sales to the size of their wheat quota, about 9.64 million tons from all nations. The U.S. would typically have at least a third of the market in China, Henry said.
If China purchases 3 million tons from the U.S., they could potentially be the new top market for U.S. wheat and certainly be in the top four, he said.
In lieu of in-person meetings with customers and stakeholders, U.S. Wheat’s office in Beijing is using a series of social media promotional releases through “WeChat” to communicate. Contacts are primarily mill managers and staff, trading company managers and relevant regulators, but any interested parties are welcome to link to receive regular releases, according to U.S. Wheat.
Competition for China is “pretty steep,” Henry said.
“You can’t have that large of a market without having other countries interested in it,” he said.
During the two years where the U.S. was effectively shut out of the Chinese market, Australia and Canada were still selling wheat there, he said.
“Nobody can match the U.S. in terms of the breadth of the classes of wheat we supply and the quality we supply,” he said.
Following the signing of the Phase One agreement, the COVID-19 pandemic delayed Phase Two negotiations. Henry doesn’t expect further movement until after the U.S. presidential election and an examination of the first year of Phase One of the agreement.
The election adds a little uncertainty, but no more than any other election, Henry said.
“It’s not unreasonable to think that a country wants to know who they’re going to be sitting across the table from,” he said. “Both major parties are talking a lot of tough rhetoric on China. It’s clear we’re not going back to the status quo of 10 years ago.”