China’s historic buys last week seem to come with nervousness from other major importers. Arlan Suderman of StoneX says after USDA announced sales of 80.3 million bushels of corn to China early last week, but Wednesday’s sales to China also revealed purchases by “unknown destinations” that totaled 8.4 million bushels. Suderman said that could be an indication that other buyers are getting nervous.
“That’s one of the things we look for as prices go high is rationing demand,” says Suderman. “We’ve never found a price over history that China won’t pay for soybeans, and I’m guessing the same would be for corn.”
Suderman says while some people will argue China’s buying floodgates have already opened, rationing demand isn’t happening yet for China.
“It’s the non-China purchases that are a concern, and we are rationing corn demand some in livestock,” adds Suderman. “We’re rationing it some in ethanol right now, although that added ethanol demand will certainly help. But for the most part, we’re really not seeing a lot of rationing, especially in soybeans. Non-China buyers continued to buy up continuously at strength, and really kind of some hoarding and some panic buying. And frankly, after the pandemic now, we’re seeing a number of countries raising their reserve levels and starting to restrict exports are increasing imports, because everyone’s kind of worried about supplies. That, combined with the increased money supply, is really creating a perfect storm.”
Tommy Grisafi of Advance Trading warns producers to take caution with marketing approaches right now. Whether the market is rationing demand or not, he says the unprecedented rally this fall and winter in the markets is creating both opportunities and challenges.
“Don’t go broke because you got involved in something that’s never happened before,” says Grisafi. “Don’t be the first to say, ‘hey, I shorted $8 corn because it’s never gone higher than this.’ A lot of things that have never happened, have happened out there today. There’s someone who bought crude oil at one penny. And they went broke when it went to negative $47.”
