China’s Set to Import More U.S. Corn and Squeeze Global Prices
(Bloomberg) -- China is set to import more U.S. corn, with volumes for next year seen hitting the top end of market expectations and squeezing global grains prices.
State-owned food titan Cofco Corp. has sold 10 million tons to domestic private mills and will probably boost purchases from the U.S. even further, according to people familiar with the matter. This could put China’s total imports of the American crop on track to hit 30 million tons next year, the people estimated.
The purchases -- which are in addition to China’s annual corn import quotas -- could drive up Chicago futures that are already trading near their highest since July last year. Grains have been surging amid robust Chinese consumption, with domestic corn prices near a record as demand for hog and poultry feed grows and state reserves dwindle.
Investors and growers are also tracking China’s progress in fulfilling its pledge to buy $36.5 billion in U.S. agricultural goods this year and $43.5 billion in 2021. While overall purchases so far have fallen short of Beijing’s trade deal agreement, imports of American grains have soared in recent months as the economy has strengthened and China rebuilds a hog herd that was decimated by African swine fever.
The nation allocates annual corn import quotas to state and private firms. Cofco may at times receive allowance to buy additional amounts and resell domestically to private mills or to replenish state reserves. The quotas for 2020 and 2021 are set at 7.2 million tons each.
Cofco has signed supply agreements with private mills for an additional 10 million tons, said the people familiar with discussions, who asked not to be identified as the information is private. Some shipments will arrive in the first half of 2021, the people said.
Cofco and the National Development & Reform Commission, the country’s top economic planner, didn’t respond to requests for comment.
|More on China’s buying spree:|
|China’s Haul of U.S. Crude and Corn Eyed for Trade Deal Progress|
|China’s Record Farm-Goods Spree May Still Miss Pledge to U.S.|
|China Exceeds WTO Corn Quota For First Time as Demand Soars|
|China Buying Spree Drives Soybean Futures to a Six-Year High|
|USDA Sees U.S. Corn Exports Surging to a Record|
The jump in shipments has sparked speculation that China could become the world’s largest corn importer. The U.S. Department of Agriculture’s Foreign Agricultural Service estimates China could buy 22 million tons in the 2020-21 season, while Goldman Sachs Group Inc. said shipments could surge to 33 million tons in 2021.
Benchmark Chinese corn, used to produce a range of products from animal feed to starch and alcohol, dropped 0.6% to 2,578 yuan ($391) a ton Friday on the Dalian Commodity Exchange. Chicago futures were closed Thursday for Thanksgiving holiday.
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