The U.S. announced 25% tariffs on certain goods from the European Union, including agricultural goods. Today I discuss what it is we import from European countries, and some of the progress on a trade deal between the U.S. and China.
Chinese Trade Deal
I am reluctant to write short pieces like this blog without data to back up what I’m saying. That is why I try (try being the operative word) to link to data sources, and provide data-backed charts and graphics so often. I’m learning along with everyone reading and digging through data helps me as much as it helps anyone who reads this publication. However, I’ve been asked enough recently about the prospect of a deal with China that I figured I would write a quick spot regarding where murmurs and reports say the countries’ negotiations are.
Market response to trade news has become mixed as the trade war drags on, even as reports of a ‘proverbial light at the end of the tunnel’ are creeping out of Chinese and U.S. administrations. Even after the rumors of this mini-deal Bloomberg, quoting unnamed sources, reports China has agreed to purchase $20 billion of agricultural products in 2020, ramping up to the previously mentioned $40-50 billion in the following years.
An annual purchase of $20 billion of agricultural products would be approximately what China was purchasing each year prior to the initiation of the trade war. In the years 2014-2017 China purchased $24 billion, $20 billion, $21 billion, and $19 billion worth of agricultural goods, respectively. That figure dropped to $9 billion in 2018, and is on track for a similar finish in 2019.
The earliest reports of a potentially signed deal are as soon as mid-November at the Asian Pacific Economic Conference (APEC). So what would prices revert to if a deal is signed between the U.S. and China? So many exogenous factors have come into play since that time that a reliable estimate is complicated to calculate. However, for reference, on October 25, 2017, prior to the initiation of the tariffs, CME DEC 2019 Corn was $4.14/bu., CME NOV 2019 Soybeans were $9.94/bu, KC HRW July 2020 Wheat was $5.76/bu, and ICE DEC 2019 Cotton was $0.67/lb.
Is the light at the end of the tunnel the sun coming out, or a speeding train? The only thing I will finally accept as fact is a signed deal.
In more trade news, the U.S. has committed to 25% tariffs on agricultural products from the E.U. as a result of a recent World Trade Organization (WTO) ruling regarding what they deem unfair trade practices surrounding Airbus. Specific products targeted by the tariffs include dairy products, French wine, pork, coffee, olives and single malt whiskey.
The E.U. has threatened retaliatory tariffs. If/when those are instated I will likely cover what it is we export to the E.U. From 2014-2018 the U.S. exported $12.2 billion in agricultural products to the E.U. on average. In the meantime you can see my post on how tariffs work here.
There has been so much focus on Pacific nation trade over the last decade that the E.U. is often overlooked. To that end, I thought it would be a good idea to examine just how much we import from E.U. countries. Agricultural imports from the E.U. in 2018 totaled just over $23 billion. That is more than what the U.S. was exporting to China prior to the beginning of the trade dispute.
U.S. Imports from European Union Countries, 2014-2018
There are currently 28 countries in the E.U. If Great Britain’s Brexit move succeeds that number could shrink to 27. Rather than described them all, we’ll lay out top exports from each country that the U.S. imported more than $2 billion of agricultural products from in 2018.
Italy – Surprise, the top product the U.S. imported from Italy in 2018 was wine and ‘Wine Products’. Of the $4.8 billion in agricultural goods the U.S. imported from Italy in 2018 about $2.1 billion was wine. Out of pure curiosity, I dug in and found the top wine imported; white.
France – Wine also took the top spot as far as imports from France in 2018. Of the $3.8 billion in French imports in 2018, about $2.1 billion was wine. The largest individual type of wine imported was sparkling wine, which accounted for about $713 million in imports in 2018.
Ireland – Responsible for $3.5 billion in U.S. imports from the E.U. in 2018, Ireland’s top commodity sent to the U.S. was surprising. A little over $2.7 billion of the $3.5 billion in products the U.S. imported from Ireland came from Essential Oils.
Netherlands – The top product the Netherlands exported to the U.S. was something that would work as a great bar trivia question. Of their $2.2 billion U.S. export market in 2018, $890 million came from ‘Miscellaneous Horticulture Products’. Digging a little further, $622 million of that came from ‘Beer Made from Malt’, aka Heineken.
Spain – Spain’s exports to the U.S. in 2018 accounted for approximately $2.1 billion. Again, wine took the top spot, representing a $392 million market in 2018. The top category of imported Spanish wine; red.
Germany – German exports to the U.S. were a mixed bag compared to the other countries described here. Germany’s total export market with the U.S. total approximately $2.1 billion. The top products were ‘Horticulture Products’ totaling $661 million, with miscellaneous horticulture products like honey, tea, and prepared enzymes representing $358 million. Other top horticulture products included wine, essential oils, and hops.
In the News:
Cattle on Feed – Today
October 28 – Crop Progress
November 7 – Texas A&M AgriLife Extension Southwest Dairy Days (Register Here)
November 15 – Deadline for Pasture, Rainfall, Forage (PRF) Insurance
January 5-11 – The Executive Program for Agricultural Producers (Register Here)
February 6-7, 2020 – Developing this Year’s Marketing Plan for Feed Grains and Cotton, Amarillo AgriLife Research & Extension Center