Corn futures prices remain above $4 despite the good U.S. crop and reports that U.S. corn exports are being turned away by China.
China has turned away about 180,000 tons of U.S. corn since mid-November, according to a Reuters report. The Chinese blamed refusal of the corn on it being genetically modified with MIR162 for insect resistance. But the news service adds that the turned-away corn may be due to WTO squabbles between the U.S. and China.
Still, March corn prices remain stable at about $4.30 per bushel after new-crop December closed at $4.10. Mark Welch, Texas A&M AgriLife Extension economist, says overall demand for U.S. corn has remained strong. “I feel optimistic on the demand side,” Welch tells Corn+Soybean Digest. “Even with all of these concerns with China, export sales are up. I think (USDA) will raise the export target over the next few months.
“We’re also producing and using a lot more ethanol. And livestock feeding is up. Cattlemen can afford to put 600-pound feeder cattle on feed again.”
Welch says China is becoming more dependent on imported grain. “I think China is an increasingly important destination for U.S. feed grains and DDGs,” he says. “So you want to provide what the customers want on legitimate terms. I don’t think the (GMO) concerns will destroy trade relationships, but there are issues we have to work out.”
He notes that even with the good 2013 U.S. crop, which helped fill a near-empty supply pipeline, corn carryover stocks remain normal. “Stocks are just above average,” he says. “It’s not like we’re swimming in corn. We just have to work through the ‘psychology’ of that.”
But lower prices remain possible. “If it looks like we will have another big crop that will add to those stocks, then we could see corn futures pressing down toward the $4 level,” Welch says. “EPA’s action on fuel standards and a major customer questioning supply also weigh on the market.”
Meanwhile, there are reports that about 2 million tons, or 78.7 million bushels of U.S. corn are headed for China in ships and China already has committed to buying another 3 million tons of the U.S. grain. Reuters says China last month fought back against U.S. accusations that it was blocking a WTO technology deal, with a Chinese official calling the U.S. “irresponsible.”
Welch says some wonder if the China incidents “are legitimate concerns, or if it’s a marketing ploy to gain leverage.”