China Food Giant Says Trade War Bad for Everybody

Agriculture is emerging as a key pressure point in a growing trade spat, stemming from US tariffs on steel. China is the No. 1 buyer of U.S. farm goods as a rising middle class and growing population fuel demand for imported food. ( MGN )

(Bloomberg) -- China’s biggest food company is sounding the alarm bells over escalating trade tensions with the U.S., pointing to potential suffering for the global economy and blow back for both countries if agricultural goods are used as bargaining chips in the fight.

Tit-for-tat actions on trade aren’t “going to be any good for the whole economy,” Cofco Corp. President Patrick Yu said in a Bloomberg Television interview at the state-run firm’s headquarters in Beijing. “It just creates a lot of conflicts and misunderstandings.”

“I don’t think that any government wants to take any action to block the agricultural trade because it not only benefits China and Chinese consumers, but I think it will benefit” U.S. farmers more, he said.

With President Donald Trump’s tariff’s on steel and aluminum igniting the potential for a global trade war, agriculture is emerging as a key pressure point. China is the No. 1 buyer of U.S. farm goods as a rising middle class and growing population fuel demand for imported food. While the U.S. is said to be considering a raft of measures targeted at the Asian country, which Trump blames for the decline of American manufacturing, Beijing has already fired a warning shot with a probe into imports of U.S. sorghum.

Last month, people familiar with the matter said China was said to be looking at the potential impact of what some analysts see as its most powerful weapon: measures against the almost $14 billion-a-year trade in soybeans. The protein-rich crop, used to feed pigs in China, is grown in Midwestern states that helped fuel Trump’s election victory. Brazil has started to grab market share from U.S. shippers.

While Yu doesn’t think the U.S. president would do “anything ridiculous” when it comes to farm trade, he is worried about Chinese companies’ activities in the U.S. being curbed.

“I’m afraid with Donald Trump and the current policy that it will be very hard for Chinese companies -- especially companies like Cofco -- to further facilitate Chinese investment in agricultural areas in the U.S.,” Yu said in the interview, which took place as China holds its annual National People’s Congress.

Beijing-based Cofco is one of the the world’s largest buyers of food commodities such as soybeans. Founded in 1949, the company had sole purview over the country’s agricultural imports until the late 1980s.

Overseeing a string of units along the supply chain -- from growing and processing to commodities trading -- Cofco tried to bolster its global heft by acquiring Dutch grains trader Nidera BV and Noble Agri. Integrating those businesses has proved challenging, Yu said.

China’s trade minister has sought to calm tensions with the U.S., saying over the weekend there would be “no winner” in a trade conflict. Yu, a congress delegate, downplayed the prospect of the oilseeds being used as a political football.

“U.S. supply is one of the most important resources for all the soybean importers or buyers from China, because the U.S. market is very open, there’s the futures market in the U.S., the systems have been very efficient,” Yu said. “The Chinese government is still very much encouraging” companies to buy U.S. soybeans, he said, adding he expects officials to try and facilitate discussion with the Trump administration over trade issues.

For now, the almost $32 billion U.S.-China trade in agricultural goods is “very stable”, Yu said. “China and the U.S. are to some extent mutual partners, with China the largest importer and consumer, and the U.S. the largest producer and exporter.”


Copyright 2018, Bloomberg News


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