The spread of the corona virus has left the market skeptical about China’s ability to meet the $36 billion of first year purchase commitments in the Phase One deal with the United States. North Dakota State University Extension Grain Marketing Specialist Frayne Olson says the concern is the impact the epidemic will have on China’s demand and economic recovery.
He says there is an out clause in the Phase One agreement which would allow China to renegotiate the ag purchase commitments in the case of natural disaster. However, Olson thinks it’s unlikely the Chinese will use corona virus as an excuse to rework the deal.
In fact, Olson says there is very strict enforcement language in the pact that allows the U.S. to invoke stiff penalties if the Chinese don’t meet the targets.
The treaty will be implemented by February 15 and Olson expects some ag purchases to begin at that time even though the agreement is based on a calendar year.
