Corn prices are rising and China is partly to blame

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Corn prices hit a nearly 8-year high on Tuesday, part of a widespread rally in agricultural commodities that is stoking inflationary fears. There are several factors driving the corn movement, including strong demand from China. How strong? The chart below shows how much yellow material the US Department of Agriculture estimates China is prepared to import from around the world this trading year: 24 million metric tons, or MMT. That’s a big leap from last year’s estimate of 7.6 MMT and the previous marketing year total of just 4.5 MMT tonnes. The current marketing year ends August 31.

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But that estimate, included in the monthly report on World Agricultural Supply and Demand, or WASDE, which the department follows closely, may be underestimating the case. The Beijing office of the USDA Foreign Agricultural Service, in a report on April 16, predicted that imports would reach 28 MMT. China is starving for corn and other feed grains and feed ingredients as it rebuilds a herd of pigs that was half-wiped out in 2018-19 by African swine fever. China’s Ministry of Agriculture said in February that the country’s pig inventory had recovered to 92% of its pre-fever level by the end of 2020 and would fully return to that level by June 2021, the Chinese Foreign Agricultural Service said. USDA added, but added that “significant industry doubt persists.” Meanwhile, “optimistic forecasts are that feed ingredient prices will continue to rise due to strong market demand.” Certainly, corn futures have skyrocketed. July C00 Corn Futures, -0.19% CN21, -0.19% traded as high as $ 6.84 a bushel on Tuesday, the highest intraday level for a more actively traded contract since March 28, 2013 according to Dow Jones Market Data, but it closed at a loss. So what does China’s demand mean for the US, the world’s largest corn producer? The USDA, in the April WASDE report, raised its forecast for total U.S. corn exports to a record 2.675 billion bushels for the current business year, up from a March estimate of 2.6 billion. million bushels and an increase of more than 50% to 1,778 million bushels in the 2019-20 marketing year. So far, U.S. corn export inspections are in line with USDA projections, noted Ben Brown, a senior research associate at the University of Missouri College of Agriculture, Food and Natural Sciences, in a published article. on Tuesday. Additionally, the chart below underscores how the current pace of US corn exports is outpacing the five-year average and last year’s performance.


In fact, March is expected to have set a monthly corn export record at approximately 361 million bushels, surpassing the previous record set in May 2018 of 305 million bushels and the March record of 262 million bushels set in 2017. Brown wrote. US corn exports could also be boosted if what is known as Brazil’s safrinha corn crop disappoints. The term refers to second crop corn that is planted after Brazil’s first crop soybean crop and now exceeds the country’s regular corn production. A late soybean harvest reduced safrinha acres and will risk poor rains in May, Brown said. Closer to home, US farmers’ corn planting intentions were lower than expected late last month. And cool, wet weather has slowed early planting progress, although forecasts have called for better planting weather in the future.