China’s record corn-buying spree — a cornerstone of its trade deal with the US — might be running out of steam, with risks growing that imports by the top buyer would fall short of US official estimates.
The domestic harvest season is looming and China is expecting a bumper crop after farmers sharply boosted corn planting this year.
That is already starting to weigh on Chinese corn prices, narrowing the gap with overseas prices and hurting the attractiveness of imports, traders and analysts said.
China’s corn purchases in 2021-2022 would probably miss the US Department of Agriculture’s prediction of 26 million tonnes, StoneX Group Inc senior Asia commodity analyst Darin Friedrichs said.
That forecast “is pretty aggressive and I don’t think we’ll see it.” he said.
The nation’s agricultural imports, especially from the US, have been closely watched by investors and businesses tracking the progress of the trade deal.
Prices across a variety of agricultural products have soared in the past year because of Chinese demand for crops to feed its expanding hog herd, stoking concern about food inflation.
Corn in Chicago jumped to an eight-year high in May.
China has imported about 23 million tonnes in the 2020-2021 marketing year, close to the US Department of Agriculture’s forecast of 26 million tonnes.
The department kept its official forecasts unchanged for 2021-2022, while the US Foreign Agricultural Service said imports would likely be 20 million tonnes.
Up until last year, the Asian nation was never a huge buyer of US corn, but its supply deficit has widened after years of reducing state corn stockpiles and as its hog herd recovers from a devastating African swine fever outbreak.
The purchases also help China meet its commitments made under the US trade deal.
High corn prices have spurred Chinese farmers to switch away from soybean planting in the northeast, so there should be increased corn production this year, Friedrichs said.
Additionally, there are problems with China’s wheat quality due to bad weather. While that wheat cannot be used for food, it can be used for animal feed, further reducing corn demand.
“The market is bifurcated — China’s diet is becoming more Western and that creates a supply deficit for high-quality wheat,” he said. “China will likely import relatively large amounts of wheat this year to help supplement the stocks of high-quality wheat.”
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