DENVER, COLORADO, US — Since mid-2020 China has purchased large amounts of US grain to due to a jump in feed demand, strong currency and less availability from Brazil. China’s need for grains is expected to continue but the country’s purchasing plan seems to be changing, according to a CoBank Knowledge Exchange report.
Continued pork production is expected to fuel China’s demand for feed and purchase of US grains but the current US grain prices have become volatile, and China is being more opportunistic about its imports.
“China will remain an active buyer of US grain through at least the 2021-22 marketing year,” said Kenneth Scott Zuckerberg, lead grain and farm supply economist for CoBank. “But the increased volatility in grain prices has led China to shift its buying pattern to wait for price weakness before committing to additional purchases, as well as to contract now for the next marketing year.”
China’s increase in US grain purchases created record high grain prices that peaked in May. A period of elevated price volatility, coupled with an ongoing inverted futures curve, means that grain elevators and merchandisers will require capital discipline and excess liquidity, Zuckerberg said.
The United States already has exported 57.1 million tonnes of soybeans, corn and grain sorghum to China so far in 2021, according to the CoBank report. A jump from 15.5 million tonnes in the same period of 2020 and 7.9 million tonnes in 2019. China is anticipated to continue its US grain buying into the 2021-22 marketing year, having already contracted 10.7 million tonnes of new crop corn and three million tonnes of soybeans to be delivered after harvest.
“Barring cancellations, these orders lend confidence that US feed grain exports to China will continue to be strong during the next six months,” Zuckerberg said.
China has been working to rebuild its swine population after it was challenged with an African swine fever (ASF) outbreak. While the country did see a decline in hog slaughter in 2019 and 2020 due to ASF and the COVID-19 pandemic, CoBank estimates slaughter to increase to 520 million head in 2021 compared to 460 million head in 2020.
“The combination of steady pork production, higher slaughter rates and currency tailwinds suggests the Chinese appetite for US feed grains will remain strong,” Zuckerberg said.
12:06 - 5/07/2021 / Number : 19349 / Show Count : 40