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China Missed Target on Ag     01/20 15:21

   Biden Administration Looks for Ways to Get China to Meet Phase One Deal Ag 
Commitments 

   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. 

Chris Clayton
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 
Committee.

   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 
Mann, R-Kan.

   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.

   SUPPLY CHAINS

   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 
Solutions" here: 
https://www.dtnpf.com/agriculture/web/ag/news/article/2022/01/04/port-expands-sp
ace-alleviate-ag.

   FERTILIZER CHALLENGES

   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 
the U.S."

   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 
https://www.dtnpf.com/agriculture/web/ag/crops/article/2022/01/13/texas-study-sh
ows-fertilizer-prices.

   "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. 
(https://www.dtnpf.com/agriculture/web/ag/crops/article/2022/01/06/new-supplemen
tal-insurance-pace-non)

   BIOFUELS

   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 
small-refinery exemptions.

   "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 
construction."

   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 
said.

   Chris Clayton can be reached at Chris.Clayton@dtn.com

   Follow him on Twitter @ChrisClaytonDTN




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