China has been on a corn-buying spree recently. The business is welcome with U.S. corn exports running behind last year’s pace by nearly 40%. So why is China back in the market, and how much more will they purchase?
China was largely absent in the U.S. corn export market last year after record purchases of 846 million bushels in the 2020-2021 marketing year. However, there were rumors the past few weeks that China might be in the market for corn, and it was finally confirmed with last week’s flash sales. Market experts say China needs the corn as the country reopens after COVID and demand picks up. U.S. corn is also cheaper as China’s corn price is nearly $10.50 a bushel.
U.S. corn has dropped to a price level that is competitive globally, below Ukraine and Brazil, which is running out of corn supplies. This is attractive to Chinese end users who are shrewd buyers.
Darin Newsom, senior market analyst with Barchart, says: “That 75-cent sell off in the futures, even with basis staying strong, is going to be an attractive buying opportunity to both domestic merchandisers and Chinese end users who absolutely jumped in on the market at that point.”
There’s also concerns about the smaller crop in Argentina due to drought and wet weather delaying planting in Brazil. Market analyst Naomi Blohm of Total Farm Marketing says a percentage of the Safrina corn crop is going in the ground after the ideal agronomic window.
“That’s significant for the South American crop because it’s more at risk to be in that hot and dry spell that always happens at a later time of year for the second crop corn, as well as the potentially early frost,” Blohm says.
That might also mean China is not done buying U.S. corn as it will be three or four months until Brazil’s second corn crop is ready to be harvested.
“We know we’re the cheapest corn in the world and even though geopolitical strains are present between the U.S. and China I think they’re building their reserve back or they’re just getting some stuff on the books,” says Darren Frye with Water Street Solutions.
They could also be concerned about a delayed planting season in the U.S. with the northern snowpack and wet conditions in the eastern Corn Belt, Frye adds.
With competitive corn prices China might not be the only buyer of U.S. corn. Market experts say USDA will need to raise its corn export projections in the next WASDE report.
