China's Aggressive U.S. Feed Grains Buying Spree Expected to Continue Despite Shift in Buying Habits
China Ag Buys 070621
China's aggressive buying spree of U.S. grains and oilseeds could continue. That's according to a new CoBank report that shows China is shifting its buying habits as grain prices produce volatility.
“China will remain an active buyer of U.S. grain through at least the 2021-22 marketing year,” says Kenneth Scott Zuckerberg, lead grain and farm supply economist with CoBank. “But the increased volatility in grain prices has led China to shift its buying pattern to wait for price weakness before committing to additional purchases, as well as to contract now for the next marketing year.”
So far this year, the U.S. has already exported 57.1 million metric tons of soybeans, corn and sorghum to China, which marks a big increase over the 15.5 million metric tons it bought last year. Additionally, Beijing has already contracted to buy 10.7 million metric tons of new crop corn and 3 million metric tons of soybeans to be delivered after harvest.
“Barring cancellations, these orders lend confidence that U.S. feed grain exports to China will continue to be strong during the next six months,” said Zuckerberg.
The report also pointed out per capita consumption of animal protein in China nearly tripled over the past four decades, with pork production accounting for the majority of the growth. And China feeds its growing hog herd with mostly imported grain.
“The combination of steady pork production, higher slaughter rates and currency tailwinds suggests the Chinese appetite for U.S. feed grains will remain strong,” said Zuckerberg.
He says the result is a ripple effect for U.S. grain producers and buyers. With a period of elevated price volatility, coupled with an ongoing inverted futures curve, Zuckerberg says that means grain elevators and merchandisers will require capital discipline and excess liquidity.
Read the full report here.
