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US $12b agricultural aid program not sustainable following supply chain disruption: analysts

By Wang Cong (People's Daily)    16:00, July 26, 2018

Consumers shop for pork at a supermarket in Wuhan, capital of Central China's Hubei Province. File photo: VCG

The US $12 billion agricultural aid program to support its farmers will not be sustainable, experts said, and US farmers will ultimately lose out in the ongoing trade tension between China and the US, with the entire supply chain being disrupted.

Aiming to remedy US farmers' losses, the US government announced on Tuesday that it would provide $12 billion to support the agricultural sector, including direct payments to hog farms, according to Reuters.

"This is a really ironic action. The US has long criticized China's industrial subsidies and now the US is doing it," a Chinese expert, who spoke on condition of anonymity, told the Global Times, adding that US President Donald Trump took the decision mainly for political purposes ahead of midterm elections.

But "the move is not sustainable," Li Yuanlong, a hog farmer in Xingtai, North China's Hebei Province, who has about 10,000 pigs, told the Global Times on Wednesday.

Li noted that the US government is basically trying to help its farmers at the same time as hurting them with the trade war.

Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultancy, said that US farmers have been hurt not just by the tariffs but by disruptions to their supply chain, and temporary relief efforts won't fix the situation.

"It is more than just the tariffs. The trade dispute also disrupts the procedures for importing and exporting, which could have an even bigger impact than the tariffs," Ma said. 

"It is hard to say that Chinese farmers will definitely benefit from this, but US farmers will definitely lose out," Ma told the Global Times.

As part of a broader response to punitive US tariffs on Chinese goods, China has slapped a 25 percent tariff on US pork imports, which has offered some respite for Chinese hog farmers who have been hit by low pork prices since Spring Festival in February.

Zero exports

"After losing about 200 yuan ($29.6) on each pig since Spring Festival because of extremely low prices, we can now break even," Li said. "It is not ideal but it is certainly a relief." 

According to Li, just last week, pork prices increased to about 6 yuan per 500 grams from around 5 yuan before.

While other seasonal factors may have influenced prices, including oversupply in a low-demand period following Spring Festival, the tariffs on US pork imports "definitely had something to do with the increase," he said.

Meanwhile, US pork exports to China dropped by 9 percent from the beginning of the year to 60,265 tons at the end of May, according to data from the US Meat Export Federation.

And in recent weeks, the US Agricultural Department has reported "zero" weekly pork exports to China. The exports have "pretty much collapsed," National Public Radio quoted Mary Lovely, an economist at Syracuse University, as saying.

Ma Changshou, who runs a large hog farm in Liangshan Yi Autonomous Prefecture, Southwest China's Sichuan Province, told the Global Times that he does not know exactly how the trade dispute is affecting his business. But, "if the cost of US pork in the Chinese market increases, then it loses its competitive edge and that's good for us." 

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Web editor: Bianji, Hongyu)

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