Glacier FarmMedia – China doubled its grain purchases in 2021, helping spur the bull run in grain markets, but what’s in store for this year?
Dan Basse, president of AgResource Company, thinks more of the same.
Why it matters: Grain purchases by China are expected to remain high for the coming year, which will help sustain higher commodity prices.
Read Also
Ontario Agricultural Stewardship Initiative third intake opens in August
Ontario’s Agricultural Stewardship Initiative (ASI)$3 million cost-share program intake opens on Aug. 13 at 9 a.m., helping agriculture, agri-food, and agri-based businesses improve energy efficiency and increase competitiveness, sustainability, and productivity.
China imported a record 65 million tonnes of grain last year, according to customs data published by the Dim Sums blog. That is about double the amount the country bought in 2020 and triple the 10-year average.
The surge was led by 28.3 million tonnes of corn imports, up from the previous record of 11.3 million tonnes in 2020.
That is nearly four times China’s annual tariff rate quota (TRQ) for corn of 7.2 million tonnes. Buyers were still importing the crop despite having to pay a stiff tariff.
They also purchased 9.77 million tonnes of wheat, up 17 per cent over 2020 levels, and 12.48 million tonnes of barley, a 55 per cent increase.
There has been speculation that China was simply rebuilding its depleted grain reserves and that purchases will tail off in 2022, but Basse doesn’t think so for a couple of reasons.
He noted the country’s hog herd has been rebuilt to pre-African swine fever levels.
“You’ve got the dynamic of more mouths to feed,” said Basse.
But more importantly, the government banned the feeding of table scraps to hogs, which had been a common practice.
He estimates that 35 million tonnes of food waste were making their way into feed rations every year. That practice has stopped for the most part, “although I’m sure somebody throws their dinner out the back door sometimes,” said Basse.
He believes 20 to 25 million tonnes of imported corn are being used annually to replace those table scraps. That is contributing to a “landscape of bullishness” for the crop.
“That will prevail for another two or three years at a minimum, at least until we pull in another 20 to 25 million acres of production in the Black Sea and South America,” said Basse.
MarketsFarm analyst Bruce Burnett agrees that the demand is definitely there in China, but he doesn’t think this year’s grain imports will match 2021 levels.
“They’ll probably import a little bit less just because their crops were better this last year,” he said.
Burnett doesn’t anticipate a drop back to historical levels of about 20 million tonnes. It will be more substantial than that but likely not in the 65 million tonne territory. He noted that imports started to tail off a bit in the last half of 2021.
A lot will depend on how this year’s harvest turns out. The wheat crop comes off in about a month, and the corn will be harvested in September and October.
Burnett said there are no red flags in terms of weather right now.
Basse said it is impossible to know for certain what is being done with the corn and wheat once it arrives in China. However, he firmly believes there is a shortfall of the commodities and that they are being consumed rather than stockpiled.
Corn futures prices on the Dalian Commodity Exchange closed at $11.14 per bu. Jan. 25, not far off the all-time high of $11.21.
That is despite China supposedly harvesting a record 272 million tonnes of the crop and auctioning off another 80 million tonnes of corn, wheat and rice reserves.
It is a solid indication that the country is consuming a lot more of the crop than it is producing, which bodes well for demand in 2022.
“It doesn’t seem like it’s one and done,” said Basse.
– This article was originally published at The Western Producer.
