China’s Corn-Buying Binge May Fall Short as Bumper Harvest Looms

(Bloomberg) -- China’s record corn-buying spree -- a cornerstone of its trade deal with the U.S. -- may be running out of steam, with risks growing that imports by the top buyer will fall short of U.S. official estimates. 

The domestic harvest season is looming and China is expecting a bumper crop after farmers sharply boosted corn planting this year. This is already starting to weigh on Chinese corn prices, narrowing the gap with overseas prices and hurting the attractiveness of imports, according to traders and analysts.

China’s corn purchases in 2021-22 will probably miss the U.S. Department of Agriculture’s prediction of 26 million tons, said Darin Friedrichs, senior Asia commodity analyst at StoneX Group Inc. That forecast “is pretty aggressive and I don’t think we’ll see it.” 

The nation’s agricultural imports, especially from the U.S., have been closely watched by investors and businesses tracking the progress of the trade deal. Prices across a variety of farm products have soared in the past year because of Chinese demand for crops to feed its expanding hog herd, stoking concern about food inflation. Corn in Chicago jumped to an eight-year high in May. 

China has imported about 23 million tons in the 2020-21 marketing year, close to USDA’s forecast of 26 million tons. The department kept its official forecasts unchanged for 2021-22, while the USDA Foreign Agricultural Service said imports would likely be 20 million tons.

Up until 2020, the Asian nation was never a huge buyer of U.S. corn. But its supply deficit has widened after years of reducing state corn stockpiles and as its hog herd recovers from a devastating African swine fever outbreak. The purchases also help meet commitments under the U.S. trade deal. 

High corn prices have spurred Chinese farmers to switch away from soybean planting in the northeast, so there should be increased corn production this year, Friedrichs said. Additionally, there are problems with China’s wheat quality due to bad weather. While that wheat can’t be used for food, it can be used for animal feed, further reducing corn demand. 

“The market is bifurcated -- China’s diet is becoming more western, and that creates a supply deficit for high-quality wheat,” he said. “China will likely import relatively large amounts of wheat this year to help supplement the stocks of high-quality wheat.” 

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