SNAP ANALYSIS: What's in the US-China trade deal

On Wednesday China pledged to purchase $200 billion more of US goods and services, including US agricultural, energy and manufacturing goods.

As part of that, the US has consistently said China will buy $40-50 billion worth of US agricultural goods per year over the next two years part of that deal.

The following is a factbox on the agriculture sector of the agreement, which was made public for the first time on Wednesday.

What and when will they buy?

Specifically, the agreement mentions oilseeds, meat, cereals, cotton, seafood and “other agricultural commodities."

In practical terms, oilseeds means soybeans and grains means wheat, corn and sorghum.

“Other agricultural commodities” includes alfalfa, citrus, dairy, dietary supplements, distilled spirits, dried distiller grains, essential oils, ethanol, fresh baby carrots, fruits and vegetables, ginseng, pet food, processed foods, tree nuts, and wine.

The agreement refers specifically to the calendar years 2020 and 2021, but there is a clause that states both parties expect increases to continue through 2025.

How much will they buy?

The figure touted by China was $40 billion worth of goods, while the US President said $40 to $50 billion.

The agreement itself states that for agricultural products China will buy no less than an additional $12.5 billion worth of the aforementioned goods over the 2017 baseline year in 2020.

For 2021, that figure should rise $19.5 billion above the baseline 2017 year.

China purchased $24 billion of US agricultural goods in 2017.

That means China has pledged to buy $36.5 billion worth of US agricultural goods (including ethanol) in 2020, rising to $43.5 billion by 2021.

However, in addition to this, China said it would “strive” to buy an additional $5 billion worth of agricultural goods, meaning the political will has been stated to buy $41.5 billion in 2020 and $48.5 billion in 2021.

However, there is one big caveat – that purchases will be made on "commercial considerations" and "market conditions" and "in the case of agricultural goods, may dictate the timing of purchases within any given year."

How much of each product will they buy?

Exact figures have not been given, but the bulk of this is widely expected to come from an increase in purchases of soybeans.

Indeed some analysts, notably Goldman Sachs, expects soybean purchases to rise 40-70% on the volume purchased in 2017 before the trade war to as much as 45 million mt in 2020 and 55 million mt in 2021.

In dollar terms, that’s $17.4 billion in 2020 and $21.2 billion in 2021, or in other words around 40% of the total committed agricultural goods.

Analysts expect the next big ticket item is likely to be meat, which will rise from about $2 billion in 2017 to around $10 billion for 2020 and $11 billion for 2021, or in other words around 25% of the total purchased.

What about non-market barriers?

The 94-page agreement contains four pages of detail on non-market barriers for meat, including a commitment by China to automatically approve for import meat plants in the US that have received approval from the USDA.

What did the markets do?

Soybeans futures trading on the Chicago Mercantile Exchange fell around 1.5% on the day, with corn futures around 0.5% down.

Wheat futures rose around 1% and lean hogs were steady.