Corn market bulls await bump in U.S. shipments to China
The rapid increase in feed demand from China that began last year has been a big part of why Chicago corn futures are at multiyear highs, though a little more follow-through for U.S. exports would go a long way in confirming the storyline.
China had not been a major corn importer for several years, but domestic corn prices began rising in early 2020, prompting unusually large U.S. bookings. Through April 22, the Asian country had purchased 23.2 million tonnes of U.S. corn for delivery in the 2020-21 year that ends on Aug. 31.
Sales have cooled off in recent weeks and the focus has turned to exports, which have picked up in pace but to a perhaps lesser degree than expected. Weekly export data suggests the United States shipped about 1.75 million tonnes of corn to China in March, a record monthly volume.
The U.S. Census Bureau is set to publish official March trade data on Tuesday, and that is expected to show last month’s overall U.S. corn exports at a new all-time high for any month, potentially topping 9 million tonnes.
Shipments to China in April are faring better at about 1.8 million tonnes through April 22, but the weekly volumes still need to increase.
The U.S. Department of Agriculture’s export sales report on Thursday showed 12.5 million tonnes still awaited shipment to China as of April 22, more than half of the country’s full-year commitments. That accounts for 47% of all outstanding 2020-21 sales, the largest share since the start of the marketing year.
China’s remaining balance requires an average weekly shipping pace of about 670,000 tonnes per week between now and Aug. 31. Inspections data suggested last week’s total at about 633,000 tonnes, roughly a cargo more than in the previous three weeks and a step in the right direction.
The China export requirement has become much larger relative to other destinations. Considering all outstanding sales as of April 22, the total weekly export pace would have to average just over 1.4 million tonnes, well below the recent four-week average of 1.85 million.
These paces are assuming insignificant forward export sales and no cancellations or rolls to the next marketing year. Sales as of April 22 accounted for 99.7% of USDA’s full 2020-21 export forecast.
China so far in 2021 has taken in substantially more corn than ever before. In the first three months, imports hit 6.73 million tonnes, up more than 400% from the first quarter of 2020. March imports alone were just shy of 2 million tonnes.
Chicago corn futures have been on a historic rise that started last year, and a lot of that strength is predicated on China importing a slew of U.S. corn in this marketing year and potentially even more in the next. But the market will undoubtedly face headwinds if China does not take all its purchases.
The relatively smaller weekly export volumes already have some traders wondering whether China will roll orders to the next marketing year or potentially cancel some of them. Either of those outcomes would reduce expectations for corn exports in the current year and raise doubts about China’s future needs.
The soybean market has already felt the effects of trust issues with Chinese demand. Soybean futures have risen in recent months, but the gains have been less than those of corn. That has been partially attributed to concerns about hog disease in China, which could reduce soybean needs, and it comes despite a razor-thin U.S. supply picture that could continue into 2022.
Source: Reuters (Editing by Matthew Lewis)