China came in with some purchases of soybeans and corn this week, and the news sent prices soaring mid-week. The export interest comes as the Biden administration says it will hold China accountable for falling short in its Phase One agricultural commitments, but analysts point out some of China’s big ag buys from last year still haven’t shipped.
Arlan Suderman of StoneX Group says USDA’s daily flash export sales report on Friday showed China purchased two cargoes of soybeans, totaling 4.9 million bushels. The order was for the current marketing year. Then, another 9.8 million bushels of corn were sold to “unknown destinations,” with some assuming the buyer was China.
Suderman says what also pushed commodity prices higher Thursday were rumors that “China was packaging purchases of U.S. soybeans and corn to be announced over the next week or two in order to appease the Biden Administration, which is upset that China missed the Phase 1 trade agreement targets by a country mile.”
Suderman says the rumored purchases were 1.5 million metric tons, plus or minus 200,000 tons, each of soybeans and corn. And the lagging corn shipments have been a topic among traders for months.
“A lot of the corn that they bought a year ago, they still haven’t taken shipment on,” Suderman said on U.S. Farm Report last week. “And that’s a concern because about 10 million metric tons -plus whatever might be part of unknown destinations in there - that they have on the books, they have started to take shipping on some of it, we anticipate that that’s going to pick up here over the next few months in the first second quarter of this year and see bigger shipments in China.”
Suderman says China has 9.5 mmt, or 375 million bushels, of unshipped corn on the books, bu thinks China would like to have a bit more to rebuild its reserves in the coming year. As for soybeans, he says the rumored totals would amount to about a week of crush at the current pace, which he thinks may be in line with what the country would need anyway to fill the gap if Brazilian farmers continue to hold tight to new-crop supplies.
“The added purchases help close some of the gap needed for reaching this year’s USDA target for exports. Ironically, the rumors helped sustain a rally in soybeans, while corn prices fell flat again. China currently has 3.6 mmt, or 132 million bushels, of unshipped soybeans on the books, which is roughly a two-week supply for its crushers,” says Suderman.
Suderman also points out China has been relying heavily on corn from Ukraine up to this point, despite the unshipped corn still sitting in the U.S..
“We do expect it to pick up but new sales, we’ve been just basically expecting new sales to be kind of flat in the China and overall shipments to China to be a little bit weaker this year. And then the pickup next year, once again, continue to see some poor feed margins in China. Wheat is cheaper in some regions as well. I think that’s going to be a near term problem. Now, putting relative to past years, it’s still big, it’s still a lot bigger than what it was just down a little bit from last year, and then pick up next year. But I think in the end, I agree with USDA ‘s decision in the most recent report to cut exports a 2.24 to 5 billion that brought it closer to my 2.4 billion and think brought us a little closer to reality, he says.
USDA Secretary Tom Vilsack recently said China fell $16 billion short of its Phase One commitments for minimum agricultural purchases. And he says the Biden administration is vowing to hold China accountable for that. USDA Chief Economist Seth Meyer says no matter what China states as the reason, there are questions as to why their actual agricultural purchase fell short in Phase One.
“ think there is no doubt China fell short,” says Meyer. “I think the debate will continue on the reasons, especially since we’re also in the middle of a pandemic. But when you talk about buying corn from the Ukraine, it certainly does raise some questions about how they may fulfill their obligation under Phase One.”
