May 15, 2023

 

China considers cancelling more US corn purchases

 

Leading corn importer China may cancel more grain purchases from the US because it can buy more cheaply from Brazil, and some local swine feed producers are replacing corn with wheat, Taipei Times reported.

 

Corn futures in Chicago, Illinois, have been weighed down by Chinese cancellations of 832,000 tonnes of the grain over the last three weeks. Brazil's increased competition is highlighted by predictions that it will overtake the US as the top exporter this year.

 

China went on a corn buying spree in March, with the US government announcing purchases of nearly 4 million tonnes from March 14 to April 14.

 

However, US corn is less competitive, with Brazilian supplies about US$30 per tonne cheaper for delivery in the third quarter, according to traders.

 

The cancellations are also due to a lack of domestic demand for maize as animal feed.

 

Wang Xiaoyang, senior analyst at Henan-based Sinolink Futures, said demand for corn is extremely low, adding that feed producers are using a lot of wheat to replace corn.

 

Wheat prices in Henan are about CNY 180 (~US$26; CNY 1 = US$0.14) per tonne lower than corn prices, and they may fall further as a bumper harvest approaches.

 

Wheat also contains more protein than corn and can be used to replace some of the soybean meal used in feed.

 

Struggling Chinese swine farmers are doing everything they can to reduce feed costs, so traders and analysts say switching from corn to wheat is a natural choice.

 

The Chinese economy is also recovering more slowly than expected from COVID-19, which is affecting restaurant demand for food and corn consumption for starch.

 

Corn imports into the country reached a high of more than 28 million tonnes in 2021 before falling to around 21 million tonnes last year, customs officials said.

 

Inbound shipments were 7.5 million tonnes in the first three months of this year, up 6% from the same period last year, with the majority of cargoes coming from the US, Brazil, and Ukraine.

 

The cancellations occur as China anticipates a bumper corn crop.

 

Despite a government push to grow more soybeans, farmers in the northeast, the top production region for corn and soybeans, are more inclined to grow corn this year due to higher profits and easier management, CITIC Futures said.

 

-      Taipei Times