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Asian corn demand to be resilient amid costly alternatives, China imports

Asian feed buyers are facing higher feed corn input costs as the year draws to a close, but demand for 2022 is likely to stay positive as the room for alternatives has shrunk and demand from China remains solid.

As the world enters its third year of living with the COVID-19 pandemic, Asian corn demand has seen sustained momentum. While the S&P Global Platts average December CFR North East Asia corn price has eased from its historical peak of $349/mt registered May 10, it is still trading at over $100/mt above the December average from 2020.

Corn imports by South Korea, a major buyer in Asia, in 2021 remained steadfast year on year despite record prices. South Korean customs data showed that imports during January-November were about 10.53 million mt, compared with 10.86 million mt over the same period in 2020.

Platts trade records showed December purchases were about 740,000 mt, which put the 2021 total at about 11.27 million mt imports, or 3.3% lower from 2020.

Corn vs feed wheat
In the last quarter of 2020, feed wheat prices closed in on corn prices and ended up cheaper, making it an attractive substitute for corn. This led to South Korea, Vietnam and China increasing wheat in their rations.

“This year, we spent a long time with wheat well below corn. Next year, given the wheat cash outlook for the first half of 2022 and the huge corn inverse from South America, I see corn demand up everywhere,” a Singapore-based trader said.

Corn usage is expected to gain from the lack of alternative grains, if spreads are maintained.

Meanwhile, in China, wheat prices are trading above corn, making it expensive to replace corn with wheat in animal feed.

China sold 27.79 million mt of wheat as of May 6 in the government auctions conducted in 2021, already surpassing the 23.23 million mt sold in the whole of 2020.

Australia, a major wheat exporter, is witnessing a record crop in the 2021-2022 marketing year season, but untimely rainfall has resulted in significant quality downgrades.

The share of feed grade wheat could rise to 65%-70%, up from 35%-45% in 2020-21, market participants said, which could see feed wheat prices under pressure and narrowing of the spreads to corn again.

China to remain key buyer
After a strong year of feed grain imports, there are doubts that China’s imports could be as strong as it was in 2021.

Recently the US Department of Agriculture’s China attache said it expects corn imports to drop to 20 million mt in 2021-22 from 30 million mt in 2020-21.

However, China’s feed grain trade data and domestic consumption pattern showed that China needs to find alternative grains along with the rise in production to address the domestic shortage in cereal supply.

As of October, China imported 52.43 million mt of corn, barley, sorghum, and wheat with corn account for nearly half of the imports, while for the whole of 2020 China had imported 27.76 million mt of these major feed grains, according to China custom’s data.

In 2021, China sold wheat in auctions to increase the supply of feed grains, whereas between 2017-2020 it offered large quantities of corn. However, both these options have limitations entering into 2022.

China’s feed grain imports are likely to stay strong in 2022 as the hog population in the country has largely recovered from the devastating losses to African swine fever in 2018.

Much of the recent reports of lower corn imports into China are largely due to expected increases in the country’s corn production in 2021-22.

China’s corn output in 2021-22 is seen rising to 272.55 million mt from 260.67 million mt in 2020-21, according to China’s Agriculture Supply and Demand Estimates, known as Casde, published by the Chinese Agriculture Outlook Committee.

“There is a corn deficit in China, that much we know or we think we know. I would not trade any [China] corn balance sheet with a lot of confidence. But just looking at the import margins today, it’s worth entertaining the idea that in the crop year we could go very close to the 30 million mt that we saw in the old crop, instead of the 26 million mt the USDA has,” a trader with a leading agriculture commodity trading company said.

Definitely feed grain demand overall is still very strong inside China and they will easily import 20 million mt in 2021-22, and probably hit the 26 million mt that USDA has projected, said Cary Sifferath, senior director for global programs at US Grains Council.

Platts Analytics has pegged 2021-22 China corn imports at 22 million mt.

Vietnam reliant on exports
Vietnam, one of Asia’s largest corn importers, saw January-November imports falling 14.4% below 2020 levels at about 9.5 million mt, customs data showed.

Strict lockdowns, border closures and slower seafood exports have resulted in 20%-30% cuts in feed production.

Market expectation is for 10.5 million-11 million mt of corn imports in 2022 as the feed sector has seen some consolidation, while expansion plans persist. However, resumption of exports remains key to Vietnam’s overall feed grain import in 2022, market sources said.
Source: Platts

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