Market conditions will ‘dominate’ in Australia-China trade conflict: Platts

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Market conditions will 'prevail' in Australia-China trade dispute: Platts

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SINGAPORE — Australia remains in an undesirable position in its trade conflict with China, which has actually discovered alternative sources like the U.S. for materials, according to S&P Global Platts.

China is presently importing a great deal of fruit and vegetables from the U.S., consisting of wheat, corn and soybeans, Andrei Agapi, Asia-Pacific associate rates director for farming at Platts, informed CNBC’s “Squawk Box Asia” on Tuesday.

That purchasing follows Beijing accepted make “substantial purchases” of U.S. production, farming and energy items, together with services, as part of the “phase one” trade contract in between the 2 financial powerhouses.

The expert stated China has the “potential to buy more” as the nation seeks to renew its stocks and reserves. Agapi discussed, “There is space for more suppliers, it’s not exclusively a U.S. game.”

“China does not strictly need the wheat and barley … from Australia. It’s more Australia that needs the Chinese market,” Agapi stated.

A farmer runs an integrate harvester as he dumps wheat into a grain cart throughout a harvest at a farm near Gunnedah, New South Wales, Australia, on Tuesday, Nov. 10, 2020.

David Gray | Bloomberg through Getty Images

One aspect driving the cravings for farming purchases is China’s healing from African swine fever, which annihilated hog herds in the nation and sent out pork rates skyrocketing for months up until November. The economy has likewise mainly recovered from the coronavirus. As an outcome, Agapi stated “feed demand is coming online quite aggressively.”

“Whatever is going to be the cheapest supply and the most plentiful supply, that’s going to be priced in,” he stated.

That might bode well for Australia’s farmers, who are emerging from 3 successive years of dry spells and remain in a “fairly good moment to be competitive” as crop yields enhance, Agapi discussed. That offers farmers more versatility to price their fruit and vegetables competitively lower.

But in May, China imposed a large tariff on Australian barley, pricing the crop out of the Chinese market. That episode highlighted the value for Australia’s exporters to diversify their markets, Agapi stated.

The trade conflict in between the 2 nations broadened over the weekend as China once again slapped tariffs on Australian items, this time targeting the nation’s red wine exports.

“Australia had to scramble to find some homes for those cargoes, which some of them were already afloat and en route … for China,” Agapi stated, in recommendation to the barley levies. “If a decision comes from China to hold any imports — if there’s no diversification — then the exports are suddenly left stranded.”

That does not always suggest that there are no purchasers in other places for the crop. The expert discussed that Australia’s barley and wheat have actually been “historical very competitive” in locations such as Indonesia and the Philippines in Southeast Asia and even in the Middle East.

“You can always find buyers,” Agapi stated. “It’s a matter of price, essentially.”