An announcement from China’s Ministry of Finance (MOFCOM) included mention of several agriculture products that will be exempt from tariffs, chief among them whey and fishmeal, key components of pig feed in China.
US whey producers have faced challenges both from the outbreak of African Swine Fever (ASF), which reduced the pig herd in China, and also because of the sharp decline in trade with the Asian behemoth, according to Rabobank.
China’s imports of dry whey and permeate fell by 16% in the first part of 2019, it noted. US whey and permeate exports fell 53% year on year and faced a 35% drop in market share, while exports from the EU28 increased.
China imposed tariffs on multiple US agriculture products, including feed ingredients like soybeans, in August 2018 in retaliation for US tariffs on Chinese products. Both countries have added further retaliatory tariffs since then.
China has been the largest market for some US feed crops, including soybean – where the market accounted for about 61.3% of all US soybean exports in 2016/17, according to information from the US Department of Agriculture (USDA).
The country was also the primary export market for feed grains like sorghum, according to US Grains Council (USGC) data. In 2017/18, China imported about 4.2m metric tons of the feed ingredient.
The “anti-US 301 measures” would not be imposed on a selection of products from September 17, 2019, through September 16, 2020, MOFCOM said in an unofficial translation. Tariffs that had already been imposed are set to be refunded.
Chinese media also announced Friday [September 13] that both pork and soybeans would be among the US agricultural goods excluded from additional tariffs being levied on US products.
The step followed a statement from the Trump Administration that it would delay a planned tariff increase on $250bn in goods from China from October 1 until October 15 in a “goodwill” gesture.
News of the potential tariff exemption on US pork products was welcomed by the National Pork Producer’s Council (NPPC).
“If media reports are accurate, this is a most welcome development,” said David Herring, NPPC president. “The Chinese have placed punitive tariffs of 60% on most US pork products, bringing the effective tariff rate on most US pork to 72%.”
The retaliation efforts applied to US pork products cut about $8 off the price of every hog sold for more than a year, he said.
“Additionally, pork is in short supply in China because ASF has ravaged the Chinese hog herd and significantly reduced the production of pork,” said Herring. “When you consider that China is the largest producer and consumer of pork in the world, the importance of this market to US pork producers is clear.”
Allowing improved access for US pork to the Chinese market could play a role in reducing the trade imbalance with China, he said. “We are hopeful that this apparent gesture of goodwill by China leads not only to more sales of US pork, but that it contributes to a resolution of US-China trade restrictions.”
Calls for trade improvement
US feed and agricultural producers continue to call for an end to the market disruption between the US and China.
“Sales to China in the short term and a comprehensive deal for the long term are critical to the health of the US grains sector,” the USGC told us previously.
The American Farm Bureau Federation said that the ongoing situation has been a “body blow” to producers.