Putting the U.S. Trade Puzzle Together

As trade negotiations with China evolve, NSP alongside industry alliances and U.S. officials continue to create new opportunities for sorghum and U.S. products through export promotion.

Written By: Delanie Crist

Buying, selling and exchanging commodities is a complex puzzle. All of the pieces must align, and there are multiple internal and external forces holding the larger trade picture together. For any commodity, the task becomes how to put these pieces together well and how to react when pieces are moved.

One of the biggest pieces of the puzzle is demand, the quantity of a commodity other countries are willing and able to purchase. Looking back at the trade picture in 2018, demand remained steady for U.S. grain exports, but U.S. producers’ ability to move commodities was partly stilled.

Despite challenges, U.S. grain exporters reported sales in the marketing year totaling approximately 3.87 billion bushels of grain of all types.

China Halts U.S. Sorghum Trade

By January 2018, U.S. sorghum producers had exported 1 billion bushels to China since the country became a piece of the sorghum trade puzzle in 2013.

Unfortunately, when China launched their investigations into U.S. sorghum earlier in February, the home for up to 90 percent of the U.S. sorghum crop ceased to exist, and National Sorghum Producers was forced to reevaluate what the big picture would look like. Other U.S. grain commodities were quick to follow suit when China levied  25 percent tariffs.

MFP Payments Authorized

While U.S. commodities were coping with the loss of a primary world market, the Trump Administration followed through with its promise to stand by U.S. farmers. Through authorization of the Market Facilitation Program administered by the United States Department of Agriculture, trade support helped fill a piece of the puzzle left missing by China’s absence.

The MFP payments authorized $12 billion to assist eligible producers of sorghum, soybeans, corn, wheat, cotton, dairy, hogs, shelled almonds and fresh sweet cherries affected by trade damages from unjustified retaliations. NSP worked closely with USDA and other Administration officials to assess the financial losses incurred by sorghum producers. Through the short-term relief strategy, sorghum farmers are receiving $0.86 per bushel on 2018 production.

Past NSP Chairman Don Bloss said at the time of the announcement the payments send a strong message to the international trade community and will hopefully facilitate a speedy resolution to current trade disputes. Bloss also expressed hope it would build toward more lasting solutions. The second round of those payments was announced in December, bringing the total estimated MFP payments to U.S. sorghum producers to roughly $313 million.

As trade negotiations with China evolve, NSP, alongside industry alliances and U.S. officials, continues to create new opportunities for sorghum through export promotion. The sorghum industry is working with existing markets and creating new trade relationships with Spain, Columbia, Peru, the Phillipines, Thailand, Vietnam, Pakistan and others.

USMCA On the Horizon

The new trilateral agreement signed in September by the United States, Mexico and Canada also brings new opportunity for U.S. grain trade. The USMCA agreement will be finalized once the trade partner agreement procedures are complete, which includes a congressional vote on the new bill. The new agreement will further level the playing field while protecting U.S. market access.

Availability, quality and price make U.S. sorghum a convenient option for our southern neighbors. Sorghum’s ease of storage and close proximity also provide inherent advantages that will help expand market opportunities in Mexico.

Other Trade Agreements

New trade negotiations with Japan and the European Union are also underway. Strengthening our position with the two countries is important, and U.S. trade officials are meeting to address regulatory and technical barriers. Japan is the second largest importer of U.S. sorghum, and reaching an agreement would eliminate preferential treatments formerly conducted through bilateral and regional accords with other countries. Similar negotiations are underway with the European Union who is the fourth largest buyer of both U.S. sorghum and U.S. ethanol, as well as the seventh largest market for U.S. products overall.

In December, President Trump and Chinese President Xi Jinping agreed to freeze tariffs at the current level for 90 days. China has also agreed to purchase some U.S. commodities during this truce. NSP was encouraged by the purchases of U.S. soybeans and remains active in the negotiations as discussions continue. U.S. sorghum is a great candidate for sales to China, and NSP will continue to advocate for opportunities for sorghum producers to once again serve our Chinese customers.

Just like a puzzle, it will take time for all the trade pieces to come together. NSP remains eager and attentive to the trade picture for sorghum, and our hope is all agriculture commodities will see the pieces fall into place in 2019.