Rising Farm Exports to China Lift Agribusiness, Farmers

Date: Wednesday, November 4, 2020
Source: The Wall Street Journal

Rising agricultural exports to China are helping revive the fortunes of some agribusiness companies and farmers, after the coronavirus pandemic upended the U.S. farm sector.

China’s effort to boost pork production, and buy more U.S. grain and meat following this year’s U.S.-China trade agreement, are driving a surge of U.S. farm goods across the Pacific in recent months, according to government estimates. Growing demand around the world for food staples like vegetable oil and starch are keeping U.S. agriculture companies’ processing plants humming, industry executives said.

“China has come roaring back from the pandemic,” said Juan Luciano, chief executive of Archer Daniels Midland Co. ADM -2.17% , on a conference call last week. “Their recovery has surprised everybody.” Grain giants ADM and Bunge Ltd. BG -0.88% both attributed rising profits during their most recent quarters in part to higher commodities exports.

Greg Heckman, CEO of Bunge, said higher demand had the company’s soybean processing plants running at a record pace in recent months, churning out feed ingredients for Chinese hog farmers racing to rebuild the country’s pork supply after a deadly swine disease cut deeply into the China’s pork supplies. A spokeswoman for closely held Cargill Inc., which doesn’t disclose its profits, said China’s need for grain is likely to persist.

U.S. pork exports to China over the first eight months of 2020 totaled more than $1.5 billion, representing a record, according to U.S. Department of Agriculture data. China’s purchased or contracted sales of corn are at an all-time high of 8.7 million tons, the USDA and the Office of the U.S. Trade Representative said in an October report, and U.S. soybean sales to China have surged since early August.

The agencies’ report estimated that Chinese buyers had committed to $23.6 billion in U.S. agricultural purchases so far this year, following a so-called phase one trade deal between Washington and Beijing, agreed in January. Though only about $12.7 billion of that figure has been shipped to China through September, according to calculations by the Peterson Institute for International Economics, and the total remains far below the U.S. target of $33.4 billion for 2020, agribusiness executives have been upbeat.

Farmers across the U.S. grain belt for years have been struggling with low crop and livestock prices due to high production and trade battles. Covid-19 added to that economic slump this year by disrupting the U.S. food industry and snarling international commerce.

The Trump administration has responded by boosting government payments to record levels, though farmer bankruptcies this year have continued to rise.

Farm commodity sales to China are increasing as demand grows generally for food ingredients and animal feed, agriculture industry executives said, while dry weather has slowed planting in Brazil and raised concerns about the eventual size of that country’s harvest.

Recent crop-price rallies are lifting some farmers’ spirits, said Angie Setzer, vice president of grain for Michigan-based Citizens LLC, which trades in corn and soybeans. “There’s more of a pep in the step of the farmers,” she said.

Improved prospects for farmers could help seed and pesticide suppliers such as Bayer AG and Corteva Inc., and farm equipment maker Deere & Co., reap higher profits.

Some agriculture-market observers have warned that China may not meet U.S. targets for imports, and could back out of agreed purchases. Another wave of coronavirus-driven shutdowns could again disrupt the U.S. food industry. As cases have jumped, agriculture futures over the past week have given back some of their recent gains.

At Citizens, Ms. Setzer said higher crop prices in recent months have helped ease negotiations with farmers, who are often reluctant to arrange sales when prices are down. Citizens has agreed on prices for about 86% of the soybeans that farmers have committed to sell since Sept. 1, compared with only about half at the same time last year, Ms. Setzer said.

Near Union Bridge, Md., Belinda Burrier this fall has kept an eye on her phone, which alerts her when crop prices go up. When she sees favorable prices, Ms. Burrier said she notifies her husband, Dave, who calls to arrange sales with local grain companies while he harvests the couple’s approximately 1,200 acres of soybeans, corn, wheat and hay.

When crop prices hit their lowest points earlier this year, Ms. Burrier figured the farm would barely break even for 2020. Between a better-than-anticipated harvest, improved crop prices and federal coronavirus aid payments, she said she is now projecting a decent profit.

“I’m really hoping to pay all my working capital off,” Ms. Burrier said. “That would ease the stress situation around here tremendously.”


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