Chinese buyers’ huge purchase of US corn this week could show the shape of things to come, with the war in Ukraine, the only other significant origin used, leaving them with few alternatives.
Chinese corn importers – which in 2021 relied on Ukraine for 8m tonnes, equivalent to 30% of their overall purchases of the grain – in fact had relatively little exposure to the grain export turmoil caused by the conflict, with nearly all supplies ordered from the country apparently shipped.
Although industry contacts “report that China booked 4.5m tonnes of Ukraine-origin corn prior to Russia’s invasion… nearly all of that corn was shipped” before the war, a briefing from the US Department of Agriculture’s Beijing bureau said.
‘Only feasible supplier’
However, with Ukraine exports slowing to a crawl, with its ports essentially closed by the war, China will be forced to increase its reliance on US corn, which it already relies on for more than two-thirds of imports.
“Industry members expect that China will turn to more US-origin corn as the only feasible supplier to fill the gap left by Ukraine at this point,” the briefing.
“China and the only other two major corn exporters (Brazil and Argentina) have not resolved barriers that would afford them full market access despite both having phytosanitary protocols with China.”
Myanmar, with which China also has a protocol, is only a modest corn exporter.
War damage
The USDA, citing the conflict, last month slashed by 6.0m tonnes to 27.5m tonnes its forecast for Ukrainian corn exports in 2021-22, with some other commentators seeing even smaller numbers.
UkrAgroConsult on Thursday pegged at 19.3m tonnes Ukraine’s corn exports this season, despite flagging a bumper harvest of 41.9m tonnes.
The respected analysis group also forecast a sharp decline in Ukraine’s corn output in 2022-23, to 19.0m tonnes, as the war hampers seedings.
‘Could have been a record year’
The USDA bureau’s report comes in the wake of Monday’s announcement by the USDA of a Chinese order of 1.08m tonnes of US corn, the biggest such sale since May last year.
It was also the first notable Chinese order of US corn in nearly a year. Washington data show only some 200,000 tonnes in Chinese purchases over 2021-22, as started in September, up to March 24.
The USDA Beijing bureau estimates at 24.0m tonnes China’s corn imports in 2021-22, a drop of 5.5m tonnes year on year, but still the second highest on record.
“Prices, logistics, and the situation in Ukraine will limit what could have been a record year for China’s corn imports” this season, the bureau said.
‘Profitability issues’
In its first forecast for 2022-23, the bureau forecast a further decline in Chinese corn imports, to 20.0m tonnes, although this would still be high by historical standards, and the third largest on record.
“Profitability issues in the swine sector are expected to lead to” shrinkage in the country’s hog herd, a key corn consumer.
Demand will also be constrained by stagnation in industrial use, including for making ethanol.
“High corn prices coupled with food security and self-sufficiency garnering additional political priority in China, the expansion of the corn deep-processing industry has been effectively suspended since 2020.”
The briefing also noted “great interest” from China in US distillers’ grains, or DDGs, a high-protein feed ingredient made as a byproduct of ethanol output.
Last year, “even with antidumping and countervailing duty duties, which impose 53.4-65.7% duties on US DDGs, China imported 307,143 MT of DDGs, an increase of 69%”.
