China’s corn-buying binge could fall short if the bumper crop looms

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(Bloomberg) – China’s record-breaking corn buying frenzy – a cornerstone of its trade deal with the US – could be losing steam, and there is a growing risk that the top buyer’s imports will fall short of official US estimates.

The domestic harvest season is approaching and China expects a bumper harvest after farmers increased corn cultivation significantly this year. This is already putting a strain on Chinese corn prices, reducing the gap to foreign prices and reducing the attractiveness of imports, according to traders and analysts.

China’s corn purchases in 2021-22 are likely to miss the U.S. Department of Agriculture’s forecast of 26 million tons, Darin Friedrichs, senior Asia commodity analyst at StoneX Group Inc. said. “

The country’s agricultural imports, particularly from the US, have been closely monitored by investors and companies who are following the progress of the trade deal. Prices for a variety of agricultural products have skyrocketed over the past year due to Chinese demand for crops to feed its growing herd of pigs, fueling food inflation concerns. Corn in Chicago soared to an eight-year high in May.

China imported around 23 million tons in the 2020-21 marketing year, which is close to the USDA forecast of 26 million tons. The department left its official projections unchanged for 2021-22, while the USDA Foreign Agricultural Service said imports would likely be 20 million tons.

Until 2020, the Asian nation was never a major buyer of US corn. But its supply shortfall has widened after years of depletion of state corn stocks and the recovery of swine herds from a devastating African swine fever outbreak. The purchases also help meet obligations under the US trade agreement.

High corn prices have prompted Chinese farmers to move away from soybean cultivation in the northeast, so corn production should increase this year, Friedrichs said. In addition, there are wheat quality issues in China due to bad weather. While this wheat cannot be used for food, it can be used as animal feed, further reducing the demand for corn.

“The market is split in two – China’s diet is becoming more western, and that is leading to a supply shortage for high-quality wheat,” he said. “China will likely be importing relatively large quantities of wheat this year to replenish stocks of high-quality wheat.”

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