Did China buy old-crop corn?
Mar 14, 2012
Chip Flory
From The Editor
March 9, 2012
Hello Pro Farmer Members!
It was a rumor-packed market for corn today. After USDA gave us an unchanged 2011-12 corn and soybean carryover estimate, rumors circulated that China was in to buy about 600,000 metric tons of old-crop U.S. corn. We should find out early next week if China actually made the purchase. If China did buy U.S. corn, it's like the result of a couple of factors.
First, it's dry in China's primary corn production areas. We'll produce another Crop Tour newsletter next week and take a closer look at Chinese crop conditions, but 2012 crop concerns in China might be enough to encourage importers there to step-up coverage.
Second, Chinese importers have said they'll import feed (not just from the U.S., but from any source) if the price is below domestic prices and cheaper to get to feed mills in the southern part of the country. Well... if that's the case, we've discovered a 25-cent drop old-crop corn futures is about enough to encourage some Chinese buying.
Third, the market was all jazzed up about a recent study by Reuters -- in conjunction with some Chinese consultants -- that USDA and the Chinese government overestimated 2011-crop corn production. How much? By 6.8 MMT to 24 MMT. Yeah... that's quite a range. The official estimate for China is 191.75 MMT, but if the Reuters study is right, the crop could be as "small" as 167.75 MMT. Which, by the way, is very close to the earliest estimates of 2011-crop corn production that were released about a year ago.
We've said it before, but it's worth saying again. Any corn China imports in 2011-12 is "gravy" in this market -- what's really important is the long-term trend around China. It wasn't that long ago that China was still exporting as much as 600 million bu. of corn to other Asian markets. Now those markets have to look someplace else for those feed needs -- and that place is here in the U.S.
Keep an eye on Chinese activity, but we also need to focus on stepped-up demand from traditional buyers like Japan and South Korea since they can't get supplies out of China.
That's it for this week...