Why this is important to Wisconsin businesses: A closer agricultural trade relationship between the U.S. and China will benefit both countries. Wisconsin, as one of the largest agricultural states, can take the lead and explore opportunities in exporting agricultural products to China.
With the COVID-19 pandemic hurting farmers and agribusiness companies worldwide, both the U.S. and China could benefit from heightened cooperation and trade. The U.S. government predicts agricultural income nationwide will decline by 12% in 2021, and total farm debt is expected to reach a peak of $425 billion USD. Meanwhile, China still has a huge demand for agricultural products, especially soybeans and pork, and the U.S. has long been its largest source for these imports.
According to the Interim Report on Sino-U.S. Agricultural Trade issued by the U.S. Trade Representative and the U.S. Department of Agriculture, China has purchased more than $23 billion USD worth of agricultural products so far, representing approximately 71% of the goals set out in the Phase I Economic and Trade agreement. China imported $14 billion USD of agricultural products from the U.S. in the first nine months of 2020—a 44.4% increase from last year, according to China’s General Administration of Customs. According to U.S. officials, exports of agricultural products to China have made up for much of the loss caused by the pandemic.
From China’s perspective, importing agricultural products from the U.S. is important to meet the surging demand, especially for soybeans. China is the world’s largest soybean consumer. Annual soybean consumption in China is more than 100 million tons, and the gap between production and demand is higher than 90 million tons. According to the latest data from China’s customs agency, China imported 100.3 million tons of soybeans in 2020, which was an increase of 11.8 million tons from 2019 and broke the record of 95.5 million tons imported in 2017. China’s goal is to concentrate limited resources to ensure self-sufficiency of grain, so this demand gap is expected to continue and even expand in the coming years. One of the main reasons for this prediction is that China has a continuously growing consumption of meat, eggs and dairy products, and imported soybeans are used as animal feed.
China also is the largest pork-consuming country; however, production can barely meet domestic demand. Last year, China’s domestic pork production was especially low due to
African swine fever and floods in southern China, which caused a gap in demand of more than 10 million tons. Pork imports from the U.S. have been critical to China. In 2020, China imported 2.2 million tons of pork from the U.S., a 223.8% increase from 2019. American pork is the least expensive of all imported pork, which made it the most popular selection for China to meet its demand. It is expected that China will continue to import pork from the U.S. to control prices as well as to meet demand, in both the short and the long term.
According to a forecast from the U.S. Department of Agriculture in June 2021, the sale of agricultural products to China is expected to reach $37.2 billion USD, accounting for 23% of the total projected U.S. exports. Exports of poultry, soybeans, nuts, corn, wheat and beef could hit record levels. As the U.S. has a huge trade deficit with China, China’s plans to import more U.S. agricultural products could help to reduce the deficit. In conclusion, stronger agricultural trade and cooperation can be a win-win situation for the U.S. and China and provide opportunities to agricultural states, including Wisconsin.