The first-stage trade pact reached by the U.S. and China last week could be a boon to American farmers hard hit by the trade war, but the agricultural sector’s relief over a deal is being tempered by skepticism over the ambitious targets set by U.S. negotiators.
U.S. officials said China has committed to boosting agricultural purchases to at least $40 billion—and perhaps as high as $50 billion—annually over the next two years. The latter figure would nearly double peak sales before the trade war.
“They need U.S. pork, they need U.S. soybeans. Do they need $50 billion of agricultural goods? Absolutely not,” said Dave Marshall, a farm-marketing adviser with First Choice Commodities Inc.
There is little doubt that China can scale up its purchases from the current pace of about $10 billion a year. Its pork production has been decimated by an African swine fever, and the nation can’t yet feed its population of 1.4 billion only with domestic suppliers. Government control over the economy will also ease the process. Still, in nearly two decades of burgeoning American agricultural exports to China since its admission to the World Trade Organization, there has never been a period with the scale of growth foreseen by the deal.
Another reason for skepticism has been the absence of a formal written agreement, which officials say is still in draft form and under review.
At a news conference in Beijing last week, government officials said China had agreed to step up agricultural purchases, but declined to give details. State-controlled media in China has made no mention of the specific purchase targets announced by U.S. officials.
“I’m very, very hopeful,” said Dan Nerud, who farms corn and soybeans with his son on a 3,000-acre spread near Dorchester, Neb. “But until we actually see some stuff in writing or agreed to, that’s when I’ll have the confirmation.”
The U.S. Trade Representative’s office has put out a fact sheet saying the agreement will “support a dramatic expansion of U.S. food, agriculture and seafood product exports.” Dramatic might be an understatement. At their highest, the value of agricultural exports to China reached nearly $25 billion in 2013 and 2014, according to the Commerce Department.
However, analysts say that a major reason exports were able to hit such high levels was the higher price of commodities. In 2013, soybean futures traded at a high of roughly $13.50 a bushel—over 40% higher than they closed on Wednesday. Corn and wheat futures were roughly 100% higher in 2013 than now.
One way the U.S. could achieve its target would be by expanding sales of other agricultural products. The deal will also lift barriers on animal-feed additives and agriculture biotechnology that have prevented U.S. farmers from fully exploiting the Chinese market, according to the USTR.
That appears to be already happening. In November, China allowed U.S. poultry into the country for the first time in four years, a move which the industry estimated could lead to over $2 billion in additional sales. The U.S. has said other meats, seafood, rice, dairy, infant formula and even pet food would receive new access to the Chinese market. But it isn’t clear how this could quickly scale up to $40 billion or $50 billion a year of purchases.
U.S. Trade Representative Robert Lighthizer said last week that although the targets would be broken down by product, some of the targets would be classified to avoid distorting the market. In the absence of details, many analysts remain skeptical.
“You’re getting to the point where you’re talking about more [volume] than the U.S. exports in a year,” said Ryland Maltsbarger, associate director of agriculture pricing and purchasing at IHS Markit Ltd. “Getting to $40 billion seems to be a stretch.”
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But getting to the agricultural purchases may be the easy part, said Derek Scissors, a resident scholar at the American Enterprise Institute.
As part of the trade deal, the U.S. said, China has agreed to increase exports overall to China by $200 billion, split over the next two years, with targeted amounts specified for each year. Mr. Lighthizer has also said that trade in services is part of the deal. Including services, China imported around $186 billion a year from the U.S. in 2017, the year before the trade war began.
Mr. Scissors calculated that instead of adding $100 billion to that $186 billion total for each of the two years, exports of goods and services could be ramped up gradually, to $246 billion next year and $326 billion in 2021—an annual growth rate of more than 30% for two consecutive years, far beyond anything ever achieved by American exporters.
After agriculture, the largest U.S. export to China has been civilian aircraft, a category that will be dented at least for a time by the production suspension of Boeing Co. ’s 737 MAX jets.
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“But even if ag gets to those targets, which is a stretch in itself, and even if you get an enormous sale of aircrafts, you’re still $130 or $140 billion short,” said Mr. Scissors. “Everything else [that the U.S. exports to China] is small export volume.”
Chris Rogers, a research analyst for Panjiva, the supply-chain research unit of S&P Global Market Intelligence, says the administration’s goal “requires some heroic assumptions on the export of energy and of services market opening in China.”
Mr. Rogers said the target could theoretically be hit by sending 100% of the past 12 months of U.S. soybean exports to China, 100% of U.S. oil exports and 100% of liquefied natural gas.
The only way to reach such goals would be to divert large amounts of U.S. exports and Chinese imports away from other countries, which could set off complaints from other countries.
Because the goals are specified over a two-year window, it wouldn’t be apparent until well after next year’s presidential election if China fails to live up to the deal.
“I could verbally agree to buy $40 billion in goods, but it doesn’t mean that I will,” said Tomm Pfitzenmaier, founder and partner at Summit Commodity Brokerage in Des Moines, Iowa.
U.S.-China Trade Pact by the Numbers
Administration officials have used a series of different numbers, over different time periods and specifications, to describe their trade deal. Here’s a guide to some of the numbers.
- $24 billion: U.S. agricultural exports to China in 2017, the administration’s baseline.
- $32 billion: The amount of extra agricultural purchases, on top of the 2017 level of agricultural exports, that the U.S. says China will aim to reach over 2020 and 2021. Hitting the goal would require exports, in those two years, to average $16 billion a year more than the 2017 baseline.
- $40 billion to $50 billion: The average amount of annual agricultural exports that China will purchase from the U.S. under the terms of the deal in 2020 and 2021. The $24 billion baseline plus the $16 billion extra gets to the bottom of that range. To reach the top of the range, Mr. Lighthizer has said, China will step up purchases of some goods that are agricultural and forestry products sometimes classified as “other manufactured goods,” such as lumber.
- $128 billion: U.S. exports of goods to China in 2017, a figure administration officials have cited as a baseline, but which excludes services.
- $186 billion: U.S. exports of goods and services to China in 2017.
- $200 billion: The amount of extra purchases, on top of the 2017 level of exports, that China will aim to reach during 2020 and 2021. Hitting the goal would require exports, in those two years, to average $100 billion a year more than in 2017. The U.S. said the extra purchases would be split between agricultural goods, manufactured goods, energy and services, with targeted amounts specified for each year. Targets would likely be larger in the second year.
- $286 billion: The average total annual exports of U.S. good and services to China that would meet the administration’s goal over the next two years. If the purchases were slowly ramped up, then the goal could be reached with $246 billion of purchases in 2020 and $326 billion in 2021.
—Lingling Wei in Beijing and Jacob Bunge in Chicago contributed to this article.
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com and Kirk Maltais at Kirk.Maltais@wsj.com
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