As China continues to ramp up its buys of U.S. corn, there are no signs China will adjust its low tariff rate quotas (TRQs). According to Pro Farmer, Chinese officials said in September the TRQs for corn and wheat would stay unchanged from 2020 levels of 7.2 MMT for corn.
“The 7.2 MMT TRQ for corn is per calendar year,” says Brian Grete, editor of Pro Farmer. “USDA’s exports are per marketing year, so it’s kind of apples to oranges – there’s crossover, but it doesn’t line up exactly.”
Grete says there are ways for China to issue additional quotas above the WTO TRQ level; however, nothing has been announced or confirmed yet.
Grete says as of Oct. 8, U.S. corn exports to China totaled 1.371 MMT with another 8.745 MMT of outstanding sales on the books. That equates to 10 MMT of bookings, which includes exports plus outstanding sales.
“The bottom line is China will import as much corn as it needs,” says Grete. “Estimates are 20 MMT to 30 MMT. USDA isn’t going to change its China corn import forecast until there’s a policy change. That’s how the World Board does it even though everyone knows the 7 MMT forecast is laughable.”
If China does resort to a policy change, Brad Lubben of University of Nebraska says the U.S. and other exporting partners probably won’t know until after the fact.
“Whether it ultimately is an official announcement or whether it’s on a contractual basis, every purchase is qualified or not qualified, we’ll have a difficult time knowing until it’s over,” he says. “Not to relate it to and scale to the great Russian grain robbery of the early 1970s, but it was called a robbery because we didn’t know about it until it had happened. If China’s really bold about making purchases now, there’s no reason for them to say, ‘We’re going to make more purchases.’ They do it and then we calculate after the fact.”
Lubben says China is known for making decisions and its trading partners not discovering the changes until a much later date. There’s nothing that says China has to give advance notice, and he doubts China will make an exception this time, either. As Grete pointed out, the difficult measurement right now is China’s commitments to buy versus actual shipments.
“Measuring commitments versus actual shipments is clearly one of the challenges that USDA is currently having and trying to decide: How much do you raise export projections based on commitments versus actual shipments? In a declining market, there’s all kinds of reasons to cancel out on orders and try and take advantage of better prices to come. With the strength we’ve seen in the market in the last two or three months, there’s not much reason to cancel on commitments.”
