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Coronavirus may delay China’s purchases of US agricultural products: sources

The coronavirus outbreak could delay China’s agricultural purchases from the US under the Phase 1 trade deal, sources said, as the business supply chain in the Asian country is virtually shut due to contagion fears.

The US Department of Agriculture echoed a similar sentiment on the impact of the coronavirus outbreak on the Phase 1 trade deal.

“The current outlook for exports to China is tempered by significant uncertainties surrounding the Covid-19 outbreak, which may affect the timing of China’s purchases under the Phase 1 agreement during the calendar year 2020,” the USDA said on Thursday in its 2020 agricultural outlook report.

Beijing and Washington signed a Phase 1 trade deal on January 15 under which China committed to purchasing $36.3 billion worth of US agricultural products in 2020 and $43.3 billion in 2021.

Since soybeans account for over 50% of the annual US agricultural exports to China, soybean purchases are a vital cog in the Phase 1 deal, according to the USDA.

At least in the first quarter of 2020, the coronavirus outbreak could severely limit China’s agricultural purchase capacity due to transport restrictions across the country, a trade source said.

The virus, which has already claimed over 2,100 lives in China, has forced the government to impose heavy travel and transport restrictions across the country, thereby severely restricting the flow of commodities, including soybean meal, a vital ingredient for animal feed, a Chinese analyst said.

Until the ongoing quarantines and travel restrictions are lifted, the movement of workers is set to be limited, the USDA said. The production and trading of soybean meal in China could be affected, the USDA added.

Global financial institutions have adopted a bearish outlook for China’s economy due to the epidemic.

S&P Global Ratings lowered its forecast for China’s 2020 GDP growth to 5% from a prior projection of 5.7% on the back of the outbreak last week. As economic growth slows, so does the consumption of agricultural commodities, including soybeans.
Source: Platts

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