Global Ag Trade Begins to Recover from Pandemic Lows
About a year ago, as nations around the world were imposing shutdowns with varying degrees of restrictiveness in response to the declaration of a global pandemic, trade flows of all kinds experienced significant declines, including food and agricultural goods. As of last fall, the World Trade Organization (WTO) was projecting that for 2020, total trade volume would decline by 9 percent, due to reduced demand for certain types of goods. Over the last several months, global agricultural trade has begun to recover, bolstering prices for a number of key commodities.
Overall U.S. Ag Export Picture
As of February 2021, USDA’s Economic Research Service was projecting 2021 U.S. agricultural exports valued at $157 billion, a more than 15 percent increase over the 2020 estimate. For much of 2020, the value of U.S. agricultural imports actually were exceeding U.S. agricultural exports, though by the end of the year, the United States eked out a $2.5 billion net agricultural trade surplus on a fiscal year basis, the lowest level in decades. The projection is based on expectations of much stronger export volumes of grains and oilseeds, as well as more modest gains in meat and livestock exports. U.S. exports of horticultural and sugar products are expected to be flat compared to 2020.
Ag Trade with China
On January 15, 2020, as the world was just learning about the outbreak in China’s Wuhan province of the disease that became known as the novel coronavirus (COVID-19), the Chinese and U.S. government reached a so-called Phase 1 deal to end the trade war between the two countries, or at least set up a truce. As part of that deal, China agreed to increase its purchases of U.S. food and agricultural products for 2020 and 2021, in exchange for the U.S. government rolling back some but not all of the tariffs it had imposed on a range of Chinese goods. The deal called for China to purchase $37 billion worth of U.S. agricultural products in 2020, and $44 billion worth in 2021, both of which would have represented a considerable increase over the previous record of $24 billion in 2017, the year before President Trump launched the trade war.
Tallies of China’s level of compliance with the Phase 1 deal for 2020 by the Peterson Institute of International Economics (PIIE) indicate that China fell short of its commitment to increase imports of U.S. goods across agricultural and non-agricultural categories covered in the deal by about 40 percent. With respect to agricultural goods, China’s imports reached $23.6 billion in covered U.S. agricultural products, 36 percent short of the commitment. This figure includes record amounts of corn and pork imports from the United States, as the country attempts to meet demand for pork and rebuild its hog population after the devastating outbreak of African Swine Fever (ASF) that started during the late summer of 2018. China has now resumed its position as the top agricultural customer for the United States.
The PIIE tally also finds that through the end of March 2021, China is still falling short of its commitment for this year, with $13.9 billion in U.S. agricultural imports as compared to the $16 billion figure that would represent the first quarter of their Phase 1 commitment for this year.
In remarks at the National Press Club in March, Agriculture Secretary Tom Vilsack said that China needs to step up its agricultural purchases to meet its commitments this year, and highlighted biofuels, distillers dried grains, and dairy products as areas where more gains could be realized. He has also said that he is “satisfied” with China’s purchases so far, noting the disruptions to the global market from the pandemic. U.S. Trade Representative Katherine Tai, only in office since mid-March, has promised to undertake a comprehensive review of U.S. trade policy issues with China.
Shortage of Shipping Containers Inhibits Trade Flows
As global trade has begun to gear back up, one of the factors that has slowed trade flows is that ocean-going shipping companies are trying to cope with a shortage of shipping containers to carry the goods. Container shipping accounts for about 90 percent of global trade flows. Part of the problem stems from the fact that a large number of containers were used to ship emergency supplies such as masks to Africa and South America during the early months of the pandemic, and left at the ports in those regions rather than loaded up with new goods. In addition, commercial manufacturing of these containers also slowed considerably during the first half of 2020, so there was minimal ability to add new containers into the global supply chain as global trade began to recover.
The shortage has led to a steep increase in shipping prices, and has also impeded some aspects of agricultural trade, as numerous reports have emerged of container ships unloading their cargo originating from China in U.S. West Coast ports and then departing without refilling those containers, leaving U.S. products sitting on the docks. CNBC estimated that $1.3 billion worth of U.S. agricultural products were delayed in this manner between July and December of 2020, prompting an investigation into these practices by the Federal Maritime Commission.
In early March, a group of 70 agricultural, food, and transport companies wrote a letter to President Biden on this topic, urging him to use the authority provided under the federal Shipping Act to curb these “unreasonable, unjust” practices that are inhibiting the growth and development of U.S. exports.Acesse: www.jacksoncampos.com.br
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