President Trump signed the Phase One trade deal on Wednesday that addresses structural trade barriers and ensures $32 billion in additional agricultural exports to China -- including an indeterminate share of ethanol and distillers dried grains (DDGs).

The deal resolves some long-disputed trade issues between the two countries, with China agreeing to purchase an additional $200 billion in American products over two years, including manufactured, agricultural and energy goods, as well as services.

USDA Secretary Sonny Perdue called the deal a "huge success" that "finally levels the playing field for U.S. agriculture."

Agricultural exports were sectioned off by sales of oilseeds, meats, cereals, cotton, other agricultural commodities and seafood -- though the 94-page trade document does not indicate how that $32 billion will be split up. DDGs and ethanol were included in the other agricultural commodities segment, along with 14 other products.

While inclusion of both in that $32 billion segment is surely positive news for farmers hurt by the trade war, the lack of specificity on volumes that will be purchased and little progress on releasing retaliatory tariffs leaves variable uncertainty for America's biofuels interests.

The deal also included language intended to strengthen cooperation between the agricultural sectors of both countries.

Ag groups were largely positive toward the deal, but statements indicated skepticism toward China's commitment to purchase agricultural products over the long-term.

"Given the numerous deals that have been reached and then breached in the past two years, we are also skeptical," National Farmers Union President Roger Johnson said.

"And without more concrete details, we are deeply concerned that all of this pain may not have been worth it."

Renewable Fuels Association (RFA) President and CEO Geoff Cooper said the group was optimistic about the potential within the deal and hoped that it might "[reopen] the door immediately for meaningful exports of both ethanol and feed co-products to China."

"The signing of the Phase One trade agreement with China today is another positive step towards restoring market confidence for U.S. biofuel producers," said Emily Skor, CEO of Growth Energy.

Even with an assurance that China will purchase ethanol, the lack of a national E10 standard left some groups wary of the country's commitment to blend the fuel going forward.

"Today's trade agreement follows reports that China suspended its plan to implement an E10 nationwide mandate this year, raising more uncertainty for the industry," the American Coalition for Ethanol said in a statement.

"We remain hopeful the next phase of talks with China can conclude with the restoration of a robust and enforceable trade relationship."

Ethanol spot market reaction was minimal toward the release, as a bearish weekly report from the EIA outweighed an upward bump from the signing ceremony.

 

--Patrick Newkumet, pnewkumet@opisnet.com

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