Will China Confirm Corn Purchases?
Sep 21, 2011
With no confirmation of Chinese buying the market seems content on taking some "hot air" out of the balloon. You have to wonder if these rumors will be confirmed with China on the verge of starting harvest. Certainly talk of supplies in China being tight are not being challenged, especially since there are reports circulating that cash corn in China is changing hands for around $10 a bushel in certain locations. The concern is that domestic corn from harvest will fill voids in supplies much quicker than any US or Argentine purchase. My thoughts are that corn purchased today by China wouldn't hit the ground in their country for at least another 4-6 weeks at the absolute best. Therefore, you have to basically discount any talk that stems from the thought that purchases are being made because of an "emergency" type situation over there. As I indicated yesterday, I think there is a much stronger chance we see Japan or South Korea step in and buy corn as opposed to China.
There wasn't much press about it, but it may have some bearing on us down the road. In case you didn't hear, The Office of the US Trade Representative filed a formal "unfair" trade complaint against China yesterday with the World Trade Organization for allegedly locking US poultry exports out of their country. From what I have been told, back on Sept. 26, 2010, China levied harsh penalties and taxes on any companies importing US poultry. They made up some story about the poultry not meeting their requirements, and hit the companies with big penalties if they imported any. Most however believe the move was made by China in retaliation to the US trade sanctions that were made against Chinese steel and Chinese tires being imported into our country. Bottom-line is they were made because we made it harder for their steel and tires to come into the US, so they decided to black-ball our poultry. To say the least, the penalties have hit US poultry exporters like Tyson Foods, Pilgrim's Pride and Perdue right were it hurts. The thoughts are about $1 Billion in exports and hundreds of jobs have been lost because of this political bantering. Just look at these numbers: Back in 2008, US poultry exports to China were valued at $676.7 million; in 2009 we exported $647.3 million; in 2010 export values dropped to $135.4 million; Now through July of this year we have exported just $37.2 million. Essentially China has switched all of its poultry purchases over to competitors in Brazil and Thailand. The problem I see is that trade tensions between the two countries are seriously heating up. China won't take this latest filling by the US lightly, I just hope it doesn't prompt them to take similar retaliatory type actions towards US grain and soy exports.
This may also be a little outside the box, but I am a little concerned about a recent announcement by the "Bank of China," after they advised several European banks (Societe Generale, Credit Agricole, BNP Paribas, and UBS AG) that they would no longer trade foreign exchange forwards and swaps with them due to the ongoing debt crisis in Europe. This could certainly make some of the bigger players in the "outside" markets nervous and ultimately weigh on the trade, so be aware of the situation.
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