Here's Why China is Aggressively Buying New Crop Corn from the U.S.
USFR-RT1 5.21.21
China's appetite for new crop corn is now sitting in uncharted waters. It's now adding up to historic levels, with USDA confirming the sale of 53.5 million bushels of new crop this week. In total, China has committed to purchasing 321.2 million bushels, or 8.15 million metric tons, since May 10.
USDA confirms daily sales of 53.5 million bushels of 2021/22 corn ?to China making a total of 321.2 million bushels or 8.16 mmt since May 10th.
Also 5.2 million bushels of 2021/22 soybeans to Mexico — Ben Brown (@BenBrownMU) May 19, 2021
So, what's driving the increased appetite? Brian Grete of Pro Farmer says there's one glaring fact: China needs the corn.
"We haven't seen a whole lot of cancellations of old crop, to be honest with you," Grete says. "And I think we won't, to be honest, because they need the corn. Flat out they need the corn, and they wouldn't be buying as aggressively as they are if they didn't. I think what is more likely is that we may see some of those old crop shipments rolled into the new crop marketing year, if it gets to the point where we can't get them shipped by the end of August. And so that's the more likely scenario in my opinion."
Grete points out China buys on price when the country is faced with ample supplies. However, when the country needs the product, price is no longer a factor.
"When we talk about total commitments, both old crop and new crop, we have about 820 million bushels of U.S. corn that has to be shipped to China at some point in time," he adds. "That's obviously a lot of corn. And the question I have is whether or not that has an impact on soybean shipments, not only at the end of this old crop marketing year, which they're slowing seasonally anyway, but also in the new crop marketing year. Next fall is the time frame I'm watching, as that's typically our biggest shipping period for soybeans."
Brian Splitt of AgMarket.Net also says China needs the corn. He says there are two main factors driving that need: Brazil's diminishing crop potential and China's growing hog herd.
"You have a couple of things at play, and we've talked about Brazil and USDA is at 102 million tons for Brazilian production. When you look at the potential of Brazilian corn crop over the next couple of weeks, we're as dry and drier than we were in 2018. The difference in 2018 at this stage of the year is we were about five days away from some major relief; we don't have that in the next two weeks," says Splitt.
He says AgMarket.Net thinks Brazil could lose close to 10 million tons of production just over the next two weeks.
"Now that's all going to be out of their export program, and that's going to bring the exports back to us," says Splitt. "So, I think that's a big driver of it. I think the Chinese don't want to be caught without the coverage in front of a huge potential U.S. weather market. And the Chinese are saying that their hog herd is going to be back to pre-ASF levels by July and their slaughter numbers are going to be back to pre-ASF levels by November. And to me, their buying right now shows us that's truly what they believe."
