World’s Top Crop Trader Says Chinese Buying Has More to Go


The world’s largest agricultural commodities trader says China’s record buying spree isn’t over.

Purchases by the Asian nation have “at least another couple of quarters to go” before the top soybean and corn importer has enough supplies, said Cargill Inc.’s Chief Executive Officer Dave MacLennan. Crop prices, which have rallied more than 50% since a low in August, need to rise further to curb consumption, he said.

World’s Top Crop Trader Says Chinese Buying Has More to Go

China, the world’s biggest pork consumer, is scooping up crops from the U.S. to Ukraine to feed a hog herd that’s recovering from a deadly pig disease faster than most expected. American shippers have already sold a record amount of corn to the Asian nation, while soybean purchases are running at the fastest pace since at least 1991, U.S. Department of Agriculture data showed.

“The old adage of ‘the cure for high prices is high prices,’ it’s not there yet and the Chinese, they have been strong buyers,” Minneapolis-based MacLennan said in a video interview this week.

Chinese buying has revived profits for agricultural commodity firms, which had in recent years struggled with bumper crops that curbed the volatility traders need to thrive. Profits from exporting soybeans at Gulf of Mexico ports last year surged to the highest level since at least 2016.

That’s helped boost profits for Cargill, which has become less of a traditional trading company, with investments in areas including meat, fish feed and human nutrition. In a normal year, some 30% to 40% of the company earnings came from trading and trade-related activities such as risk management. Results are now roughly back to those levels, MacLennan said.

“It has been a difficult market to trade since 2011, since after the Russian wheat embargo -- that was kind of the last significant event in agricultural trading markets,” he said.

“For us, it was never a matter of trading being de-emphasized,” he said. “It was ‘we’re going to grow all parts of our business where there is opportunity.’”

China will likely import at least 20 million metric tons of corn to meet feed demand and build stockpiles as a way to safeguard food security, MacLennan said. That’s more than double an annual import quota set by the World Trade Organization. While China has recovered from the coronavirus faster than many other nations, new outbreaks have started to appear.

“That’s a question mark that you have to watch,” he said.

China has been buying American corn via Cofco International Ltd., the trading arm of the Asian nation’s largest food company. But reports of sales are often delayed. Purchases by Cofco’s American subsidiary in the domestic market don’t have to be reported until there’s a final agreement to sell to China, while deals done via its Geneva arm only get reported when supplies are purchased from a U.S. company.

There are other transparency issues. China doesn’t always notify the market when it issues additional quotas on top of those set by the WTO to allow imports at a reduced tariff-quota. Behind closed doors, some American agriculture executives have complained that’s left them at a disadvantage.

“We don’t see it as a disadvantage,” MacLennan said. “We see it as a reality of trading, and that’s again a business that we’ve been in for decades, if not centuries.”

Cargill is “choosing to be optimistic” China will continue to perform against the phase one trade deal and also potentially against a phase two under the Biden administration.

“It remains to be seen how the administration is going to handle trade policy with China, but hopefully the they have as a priority that the American farmer needs Chinese markets,” he said. “The Chinese are a significant force or influence on demand, obviously, and prices, which helps the American farmer.”

©2021 Bloomberg L.P.

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