U.S. corn, soybean export sales smash July records on huge China deals

09:43AM Jul 31, 2020
U.S., China
China exports
( MGN Online and Darrell Smith )

(The opinions expressed here are those of the author, a market analyst for Reuters.)

By Karen Braun

FORT COLLINS, Colo., July 30 (Reuters) - U.S. ports should be very active later in the year as aggressive Chinese bookings have boosted total corn and soybean export sales to modern-day and potentially all-time record levels for July. That follows the recent multi-year low export levels after last year's crops fell short.

China’s recent U.S. corn purchases are likely larger than the market thought they would be this early on, though while its soybean deals for next year sit at six-year highs, there is a long way to go to reach the expected targets.

U.S. corn and soybean sales to all other buyers remain no better than normal, and exporters will still have to contend with typical rivals such as Brazil.

It is difficult to compare export sales with years much past a decade or two ago, since the United States has lost a significant share of global corn and soy exports during that period. Recent years are more instructive because they reflect the increasingly competitive dynamic in the world export market.

CORN EXPLOSION

The United States this month was already on a record corn-selling pace, accumulating 5.1 million tonnes in purchases through July 23. Within the last decade or so, full July sales typically did not extend much past 5 million tonnes. (https://tmsnrt.rs/33gWJot)

But a record sale to China in the days since has boosted those sales above 7 million tonnes. The U.S. Department of Agriculture through its daily reporting system on Thursday announced a Chinese purchase of 1.937 million tonnes of corn for delivery in the new marketing year starting Sept. 1.

That is the third-largest single U.S. corn sale on record and the largest ever to China, topping the previous high to China of 1.762 million tonnes set on July 14.

Chinese corn purchases for 2020-21 stood at 3.8 million tonnes as of July 23, and Thursday’s sale brings the known total to 5.7 million tonnes or 225 million bushels. That is an anomalously high commitment level for any buyer at this time of year.

The top two U.S. corn customers, Mexico and Japan, have never booked anywhere close to that much prior to the start of the new marketing year. Japan’s purchases usually total less than 2 million tonnes by the time the new year begins, and Mexico typically books between 2.5 million and 3.5 million.

USDA pegs China’s 2020-21 corn imports at 7 million tonnes, and it seems the United States has already claimed most of this business. It is uncertain what the outlook is for other suppliers, namely Ukraine, which shipped 3.8 million tonnes of corn to the Asian country in 2018-19.

U.S. producers might be on their way to a record corn harvest this year and by next August, supplies are expected to reach the highest levels in more than three decades.

But even when compared with stock predictions, July new-crop corn sales are still well above most previous years, and that would still largely hold true even if a couple million more bushels were added to the 2020-21 carryout estimate.

SOYBEAN REVIVAL

Through July 23, U.S. soybean sales for the month totaled 7.6 million tonnes or 278 million bushels, exactly double the 10-year average for the full month and well above the sales of any previous Julys. This month’s new-crop sales account for nearly half of the total 2020-21 commitments thus far. (https://tmsnrt.rs/2BNtyxU)

USDA on Thursday surprised the market with 3.34 million tonnes of new-crop net soybean sales for the week ended July 23, and combined with old-crop bookings it was the strongest week for U.S. soybean sales in over eight years. China accounted for 59% of those purchases, and unknown buyers took 37%.

China and unknown buyers, many of which are likely China, have driven the strong U.S. soybean bookings this month. However, sales for 2020-21 to customers other than China or unknown stood at five-year lows as of last week, though not by a significant amount.

When including Thursday’s corn sale to China and the other smaller sale to an unknown buyer, known U.S. corn and soybean sales this month combine to 15.4 million tonnes or 560 million bushels. (https://tmsnrt.rs/2PcyqQd)

Brazil’s soybean exports have reached astonishing records in recent months, and it is currently harvesting what could be a record corn crop. Corn shipments have already begun ramping up and should hit their highest levels for the year in the next three months.

China accounts for more than 75% of Brazil’s total soybean exports, larger than the pre-trade-war U.S. equivalent of about 60%. But Brazil’s recent shipments to other buyers have also hit records, and by a bigger degree than those to China.

Between February and June, Brazil shipped 22% more soybeans to China than its previous record for the period. Shipments to other buyers were up 47% from the prior high, and this is important to track because if U.S. business to China dries up or if tensions escalate, the American oilseed will be seeking alternative homes.