Why China is the Wildcard for Corn Prices

USDA’s confirmed export sales of both corn and soybeans on Wednesday. The delivery is to unknown destinations, but some analysts say the buyer is likely China. As China continues to come to the market for both corn and soybeans, it’s a demand wildcard that could create tighter stocks, and higher prices, in the U.S.

USDA’s two big reports on March 31 showed some surprises, including tighter than expected stocks for some commodities. Now, as China continues to buy more commodities from the U.S., the market will be watching the demand side of the balance sheet, along with spring planting and U.S. weather.

“I think there’s some things on the demand side of the balance sheet we’re watching,” says Joe Vaclavik of Standard Grain. “How much more corn does China want to buy? When you start to look at the lower corn stocks number that USDA published, pair the lower corn stocks number with the idea that USDA may now be understating corn exports if this China demand thing continues, you could be looking at a drastically lighter old crop.”

Peter Meyer of S&P Global Commodity Insights also thinks whether China continue to buy corn, or decides to stop buying, will be the biggest determining factor for the corn stocks situation.

“We [S&P Global Commodity Insights] agree 100% with Joe,” adds Meyer. “If China keeps coming in here, you could have a problem with old crop. If China all of a sudden stops tomorrow, you could see the price sell off. But we’re 100% with Joe on the demand side, China’s the big gorilla in the room, so to speak.”

Meyer says China could create a much tighter balance sheet. How much could China still buy? Meyer says that’s anyone’s guess.

“It could be 2 million, it could be 5 million, it could be 7 million, we’re just really not sure,” says Meyer. “But we do think that without this sell off that we saw in late February or early March, China would not have been in the market. China is a value buyer. And they bought the value. And they did a good job of that. But the question now is, will they come back?”

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