Beijin – December 01, 2020
CUSTOMS data released last week reveals that China’s insatiable demand for grain continued unabated in October.
This was led primarily by demand from the country’s rapidly rebounding pork sector, which was decimated by African Swine Fever in late 2018 and through 2019.
China imported a staggering 1.14 million tonnes (Mt) of corn in the first month of the fourth quarter, the second-highest level on record.
This was quite a dramatic increase from next to nothing in October last year, and was the third consecutive month above the 1Mt level.
It pushes the country’s total corn imports for 2020 to an impressive 7.82Mt, almost double the previous year, and there is still two months to go.
That also takes China’s corn imports for the year past the official tariff rate quota (TRQ) of 7.2Mt for the first time, which was one of the requirements under the Phase 1 trade deal with the United States.
The global corn market is searching for a price that rations demand, particularly in the second and third quarters of 2021. For the rest of this year and the first quarter of 2021, the US is the place to shop.
But the South American drought and resultant corn-crop issues are certainly a genuine and growing concern for the corn balance sheet.
And now there is talk in the market that the Chinese demand is more than a short-term supply issue, but rather a longer-term structural change in domestic consumption.
Some analysts are forecasting Chinese imports of US corn will hit the top end of market expectations next year, and will exceed 50Mt by 2023.
Only time will tell on that matter, but while the pig herd is rebuilding and domestic reserves remain tight, the demand is likely to continue.
China imported 630,000t of wheat in October, up 126.9pc from the year prior. They have now imported 6.69Mt of wheat in 2020 against a TRQ of 9.36Mt. With two months of the calendar year left to report, it is possible but highly unlikely that they will breach that mark for the first time by year’s end.
Beijing sold 708,000t of wheat from its old strategic reserves in last week’s auction, less than 18pc of the 4Mt offered. Total sales now stand at 13.5Mt since the program began in June.
Prices were slightly higher than the previous week, but the clearance rate has declined from more than 70pc in October, suggesting that Chinese consumers are gaining comfort with the domestic grain supply outlook.
October barley imports came in at 5.98Mt, a jump of 13.4pc on the October 2019 number. Much of this barley came from France, which is posing challenges for European Union feed manufacturers. And as long as the Chinese tariff remains in place on Australian barley, it is highly likely that the Chinese consumers will continue to turn to France, especially to meet their malting barley requirements.
French barley yields disappointed last harvest, and French farmers have reportedly reacted by reducing the planted area in the recent seeding campaign.
They evidently didn’t read the tea leaves very well, as ongoing Chinese demand could be a game-changer for the wheat-barley price relationship in the EU.
This would have significant consequences for stock-feed producers, and ultimately, planting decisions by farmers right across Europe in coming years.
