By Bloomberg News
China, the biggest corn consumer after the U.S., is still short of the feed grain, and more overseas purchases are likely.
Asia’s top economy has to nourish the world’s largest hog herds and supply a growing local refining industry, which produces everything from sweeteners to starches and alcohol. The increased demand this year and in future years comes as the country grapples with limited amounts of productive farmland.
The U.S. reported sales of more than 1 million tons of corn to China on Tuesday, a day after the government said weekly export inspections climbed to the highest level in at least 26 years. The announcement of the latest sales coincides with an in-person meeting of top U.S. and Chinese envoys this week in Alaska, the first since President Joe Biden took office in January.
More large purchases are possible soon because of strong demand from the refining industry as well as from feed mills, said Meng Jinhui, a senior analyst with Shengda Futures in Beijing. While feed mills can use cheap state wheat or imported sorghum to replace corn, refiners’ only option is corn, Meng said.
China’s corn imports could eventually climb as high as 40 million tons this calendar year from 11 million tons in 2020, according to Meng. The latest estimate from the U.S. Department of Agriculture puts purchases at 24 million tons in the 2020-21 marketing year, more than triple a year earlier.
Still, this latest round of buying may not be as aggressive as earlier this year, when China booked almost 6 million tons of U.S. corn in a week, because local prices have eased from records, said Feng Lichen, chief analyst with industry portal www.yumi.com.cn. The premium of domestic over Chicago corn peaked in January and is now about $200 a ton, data compiled by Bloomberg show.
Corn areas jostle for space with soybeans in the country’s northeast, and the question is how much will plantings rise this year in response to high prices. Wang Yanlong, who runs a farm cooperative in Heilongjiang province, the top corn area, said it bought 20% more seeds this year, hoping to expand the crop on all of its 350 hectares of farmland when sowing gets underway in May.
The farm will shift all of the area that was under soybeans last year to corn, and he believes that lots of nearby state farms will do something similar by reducing areas under other crops, such as melons. Corn shortages drove Dalian futures to a record in January, and prices jumped more than 40% in 2020.
The country’s northern regions are expected to grow more corn on acreage expanded for wheat, said Shengda’s Meng. Corn in the north will be planted on the same piece of land after the wheat is harvested in June. The shift of more farmland to grains, including corn, and away from other cash crops, will be driven politically this year to ensure food security, said Feng.