Industry insiders have told South China Morning Post (SCMP) that President Trump's alleged $50 billion agriculture deal with China is merely a fantasy, used to stimulate his Farm Belt supporters ahead of an election year, and even used as a communication tool to drive the stock market to new highs. Still, the likelihood of it actually happening is very low.
SCMP notes that China has never confirmed the $50 to $60 billion agriculture deal that President Trump consistently tweets about and touts in headlines.
The deal I just made with China is, by far, the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Country. In fact, there is a question as to whether or not this much product can be produced? Our farmers will figure it out. Thank you China!— Donald J. Trump (@realDonaldTrump) October 12, 2019
Agricultural analysts said even if China agreed to purchase additional US agriculture products, the numbers that the Trump administration uses are incorrect.
Darin Friedrichs, senior Asia commodity analyst at trading house INTL FCStone in Shanghai, told SCMP that since the African swine fever wiped out 50% of the pigs in China, demand for soybean and corn has disappeared.
"With the African swine fever, there's just not much demand for the stuff that the US has to offer in terms of corn or soybeans to feed pigs – because we just do not have any pigs. We've lost half of them!" said Friedrichs.
With soybean prices falling from $13 per bushel two years ago to $9 today, "even if they [China] bought the same amount they did before the trade war, it's just not going to make the same dollar value," Friedrichs added.
Nick Marro, head of the Economist Intelligence Unit in Hong Kong, told SCMP that there is a tremendous "disconnect between the political and economic realities here."
"China has made real efforts to diversify its meat sourcing in recent months, signing export deals with France and Brazil. From the US too, diversification has been the order of the day."
Chinese buyers are rushing to diversify away from the US and have signed landmark deals with Argentina and Brazil for corn and soybean. They've also signed trade deals in Australia, Europe, South America, and New Zealand for beef, dairy, and pork to fill supply gaps.
John Reeve, director at Agree Commodities Australia, said China sourced very little beef from Australia in 2012 -- but at present day, China is purchasing an unbelievable amount, as it continues diversifying from the US.
"We've gone from virtually no beef going to China in 2012 to it being our biggest market now. There are 30 to 40 years of hard graft in developing the premium name, so we are very vulnerable to any fluctuation in the trade policy related to tariffs," Reeve said.
An overwhelming number of analysts found that it would be challenging for the US to restore its market share in China considering the damage the Trump administration caused by escalating the trade war.
Even though China is purchasing some agriculture products from the US in recent weeks, the numbers President Trump uses are propaganda to hype up his base for re-election and send the stock market to new highs.