China Missed Target on Ag 01/20 15:21
Biden Administration Looks for Ways to Get China to Meet Phase One Deal Ag
U.S. Agriculture Secretary Tom Vilsack on Thursday said China fell about $16
billion short of its purchase commitments for agricultural goods over the past
two years. China also did not advance policies on biotechnology or other key
parts of the phase-one agreement, but the U.S. "walks a fine line" with China
as a top agricultural importer.
DTN Ag Policy Editor
OMAHA (DTN) -- China fell about $16 billion short in meeting its commitments
for agricultural purchases under the phase-one trade agreement and the Biden
administration is looking for China to continue buying more agricultural
products, U.S. Agriculture Secretary Tom Vilsack told lawmakers Thursday.
"We are giving China, we are putting them on notice, we want them to live up
to the phase-one agreement," Vilsack told members of the House Agriculture
The secretary testified before the committee for four hours Thursday with
lawmakers questioning Vilsack about an array of topics, though some major
themes emerged over trade, supply chains, input prices and biofuels.
Congressmen also touched repeatedly on funds for packing plants, disaster aid
and dairy programs.
On China, Vilsack said, "We obviously have some unfinished business," when
it comes to the two-year phase-one deal, which officially ended on Jan. 1. Over
those two years, China vaulted back to being the No. 1 customer for U.S.
agricultural products, but the totals still did not hit China's commitments.
China had committed to buy an average of $40 billion per year in agricultural
products. Vilsack said China fell $13 billion below that total for 2020 ($27
billion) and will come in $3 billion short for 2021 ($37 billion).
Vilsack said China also had yet to revise import rules for crop
biotechnology approvals, distillers dried grains, ethanol purchases,
ractopamine acceptance levels in pork, and growth hormones for beef cattle.
"We're pushing on both of those aspects, more purchases and completing the
sanitary and phytosanitary requirements of that agreement," Vilsack said.
Multiple lawmakers quizzed Vilsack on trade and the phase-one deal, asking
what the Biden administration intends to do.
"It feels like China sold America a bill of goods and the Biden
administration has made no effort to rectify the situation," said Rep. Tracey
U.S. Trade Representative Katherina Tai is taking the lead to convince China
to meet its obligations under the phase-one deal, Vilsack said. The secretary
added, though, that the administration is figuring out ways to "walk a fine
line" with China, given that the country is the top destination for
agricultural products again.
"It's not correct to suggest we haven't done anything. It is indeed correct
to suggest that we have asked the Chinese to increase more," Vilsack said. He
noted the trade war under the Trump administration caused commodity prices to
decline. "We've seen better commodity prices in the last year, which is good
news for farmers."
Overall, agricultural exports for fiscal year 2021 (Oct. 1, 2020, through
Sept. 30, 2021) saw exports hit a record $172.2 billion, up 23% from fiscal
year 2020. On a calendar basis, Vilsack said, preliminary numbers for 2021
forecast a record as well.
Compounding some of the lower-than-expected sales to China are the
continuing problems with port congestion and shippers repeatedly willing to
return to China with empty containers rather than load them with U.S. products.
That has slowed down at least some potential export sales to China.
"That's a real problem because our products need to be going on those ships
back somehow to bring some semblance of balance of trade," said Rep. Doug
LaMalfa, R-Calif. "Our almond growers and our walnut growers are just getting
killed as stuff sitting on the docs and in storage and it's going to carry
over" with continued pricing challenges.
Vilsack highlighted that the Biden administration has been pushing shippers
to take agricultural products on containers. The administration also started
working with the Port of Oakland, California, which Vilsack said is
"underutilized" to help move more agricultural products by creating terminal
space dedicated to agricultural commodities. See "Oakland Port Offers Ag Export
Responding to multiple questions about fertilizer prices, Vilsack said
there's "no silver bullet" and U.S. agriculture needs to look for ways to
become less dependent on foreign sources of fertilizer. That includes providing
more information and technology, including relying on precision technology, to
reduce fertilizer usage.
Rep. Cindy Axne, D-Iowa, said she has heard farmers were considering
planting less corn this spring because of the high fertilizer prices. Prices
are higher because of high demand and import restrictions from other countries.
"Part of the reason is strong global demand and domestic demand," Vilsack
said. "Part of the reason is we are reliant on outside sources for some of the
fertilizer that we use, and those outside sources have made the decision to
impose export controls, which makes it difficult for us to get the supply into
One way to offset higher prices is through more investment in precision
agriculture, Vilsack said. He cited an Iowa State University program using
sensors that indicated potentially 30% of Iowa corn acres probably don't need
as much or any fertilizer.
"So, I think encouraging additional precision agriculture so that our inputs
are wisely done," Vilsack said, suggesting farmers and their agronomists will
start looking at ways to "more accurately understand precisely where and how to
utilize fertilizer, we could potentially lower those input costs,"
Rep. Tracey Mann, R-Kan., pushed back on the suggestion farmers may need to
reduce fertilizer usage. "That's not going to cut it for my producers who have
had plans in place and crop rotations for years," Mann said.
Vilsack countered that precision agriculture is going to become more
important as farmers learn to "produce more with less." He pointed to the need
to apply fertilizer "at the right place, right time and right amount."
Rep. Julie Letlow, R-La., talked about the concerns facing rice farmers with
higher fertilizer prices given that rice prices have remained static and
haven't increased similar to other commodities. Letlow cited the fertilizer
study released last week by Texas A&M University when pointing to the cost
increases facing rice. See "Tariffs Could Raise Fertilizer Prices" at
"It's a challenge. There's no question about it," Vilsack said, adding,
"There's no silver bullet. I wish there were, and if there were, we would
certainly be on top of it."
Among ways to reduce fertilizer usage, Vilsack pointed to USDA's new
insurance option for producers who split-apply nitrogen.
Vilsack took umbrage at repeated Republican suggestions that the Biden
administration doesn't support biofuels for the sake of expanding electric
vehicles. He noted EPA's proposed blend levels for 2021 and 2022 would be the
highest in the history of the program. Vilsack also said EPA is committed not
to undercutting its RFS blend volumes and rejected 65 requests by refiners for
"It's an honest set of numbers, as opposed to what happened in the previous
administration, where numbers were said then waivers were granted that undercut
those numbers," Vilsack said.
Further, USDA is providing $700 million in direct aid to ethanol producers
from pandemic losses and added another $100 million to expand blender pumps.
The Department of Energy is also investing in the "Sustainable Aviation Fuel
Grand Challenge" that could create a 36-billion-gallon market for biofuels.
"I think it is very unfair to suggest this administration has not been
supportive of the biofuel industry," Vilsack said.
DISASTER AID, USDA PROGRAMS
Rep. David Scott, D-Ga., chairman of the House Ag Committee, asked Vilsack
to help aid cotton merchandisers who have been hit during the pandemic. He said
cotton merchandisers are critical to the risk management and liquidity of
cotton farmers, and he asked Vilsack to see what funds are available under
COVID-19 relief for cotton.
Vilsack said he had been in consultation with the cotton industry, and the
Farm Service Agency is drafting a notice of funds available to provide some aid
to the industry under the American Rescue Plan or the CARES Act.
Vilsack also told Rep. Austin Scott, R-Ga., that USDA is working on
enrollment procedures for the $10 billion in disaster aid that was provided to
USDA for crop disasters in 2021 and 2020. USDA is looking to use data from the
Livestock Forage Program to make it easier to sign up livestock producers,
ideally this spring. On crops, Vilsack said USDA is looking at Risk Management
Agency data and data from the Non-insured Crop Disaster Assistance Program
(NAP) to also put together a "pre-filled-out application. He expects aid will
also go out in two separate tranches with the first payment in the spring.
"The goal here is to try to get these payments out this spring," Vilsack
said. "We're trying to simplify the process by using existing data to try to
speed up the process."
Other lawmakers had questions about when USDA would be rolling out $150
million in initial funds to expand packing plant capacity in smaller or
medium-sized producers. Vilsack said he expects the first details on that
program in the coming weeks. This money, which will eventually top about $375
million, will include grants, USDA direct loans and likely loan guarantees.
"It is designed primarily to jumpstart projects that are ready to go -- that
are shovel ready," Vilsack said. "They just need a little encouragement. They
could be an expansion of an existing facility, or they could be new
Rep. Vicki Hartzler, R-Mo., thanked Vilsack for promoting local meat
processing capacity. She noted there are concerns about companies that have
already put themselves in debt to start operating, and she hoped they would be
eligible for grants or loans.
"Those people who put everything on the line" to start a plant, Hartzler
Chris Clayton can be reached at Chris.Clayton@dtn.com
Follow him on Twitter @ChrisClaytonDTN
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