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According to some reports,
including one by Michael Hogan for Reuters, late September brought a
dip in the grain market - specifically corn, and it’s likely due to
the pace of harvests. Hogan cited Matt Ammermann, StoneX commodity
risk manager; “Corn is being weakened today by expectations of good
progress in the U.S. corn harvest.” “The extended forecasts for U.S.
corn belts are for warm and generally dry weather and we should see
a faster harvest this year.”
By late September, soybeans were being pulled between expectations
of more U.S. sales to China, but there were also concerns
surrounding China’s ability to process grain imports. Nearly two
dozen Chinese soybean crushing plants were forced to shut down in
order to comply with curbs on industrial power consumption.
Other reporters suggest that climate problems have also impacted
China’s ability to import U.S. grain.
Karl Plume and PJ Huffstutter reported in late September that “Grain
shippers on the U.S. Gulf Coast reported more damage from Hurricane
Ida (landed LA. Sunday, Sept. 29,2021) to their terminals on
Wednesday as Cargill Inc confirmed damage to a second facility,
while power outages across southern Louisiana kept all others
shuttered…Global grains trader Cargill Inc said its Westwego,
Louisiana, terminal was damaged by Ida, days after confirming more
extensive damage at its only other Louisiana grain export facility,
located in Reserve.”
In a report from the University of Illinois, Keith Good suggests
that Ida’s disruption of grain and soybean shipments from the Gulf
Coast of the U.S. accounts for about 60% of U.S. exports. “Buyers
haven’t had many options to get soybeans after Ida,’ according to
Good. So many facilities are shutting down, and because they are key
facilities to getting American exports overseas, China is forced to
look elsewhere.
Plume and Huffstutter reported that to make up for potential losses
of product, China soybean importers began “shifting orders to
agricultural powerhouse Brazil for a shipment in October — during
the U.S. harvest when American supplies are the biggest — after Ida
damaged a key export terminal and left others without power.”
In addition, China’s demand for grain started to waiver in late
September. According to reports, “Demand is looking bearish as well.
China’s record corn-buying spree may be running out of steam as
domestic production is set to climb and local prices weaken, making
imports less attractive. There are risks that purchases by the Asian
nation will fall short of U.S. official estimates for the 2021-22
season.”
In a second report, Good cited a Bloomberg report, writing that,
“China’s record corn-buying spree — a cornerstone of its trade deal
with the U.S. — may be running out of steam, with risks growing that
imports by the top buyer will fall short of U.S. official
estimates.”
Officials worry that China’s corn purchases in 2021-22 will probably
miss the U.S. Department of Agriculture’s prediction of 26 million
tons. Commodity analysts are split on the forecast, with some
claiming that such a figure is too aggressive. Good reported that
“China has imported about 23 million tons in the 2020-21 marketing
year, close to USDA’s forecast of 26 million tons. The department
kept its official forecasts unchanged for 2021-22, while the USDA
Foreign Agricultural Service said imports would likely be 20 million
tons.”
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One of the reasons China has
such a high demand for grain is due to hog operations. As of
September, China's 2021/2022 feed consumption was down 3 million
tons from the previous month's forecast. In another report Hallie Gu
and Shivani Singh wrote that any expansion of hog production was
expected to slow down due to lower prices of pigs in China. This is
because hog prices have fallen over concerns surrounding African
Swine Fever outbreaks. Feed producers also reduced the use of corn
by utilizing alternative grains, such as wheat and rice.
As of mid-October, a second report from Huffstutter suggested that
Chicago corn futures continued to drop, and soybean futures
continued to fall. “That in turn has prompted the market to closely
watch whether Chinese buyers will rush into the market,” said
Huffstutter.
Traders are viewing these decreases as a warning to avoid looking
too closely at overall U.S. grain demand. The corn crop may be doing
better than initially thought, but U.S. traders are still not seeing
China buying much more right now. It’s difficult to pin a number on
just how much grain China will buy from the U.S., or from anyone.
There’s a number of reasons why, and it doesn’t look like we’ll have
a consensus until after the season is past and the actual statistics
are available for study.
Sources
China cuts 2021/2022 corn forecast as pig prices
remain low
China’s Import Demand for Corn in Focus, as Brazil’s
First Corn Planting Underway
GRAINS-Corn down on U.S. harvest pressure, soybeans
up
GRAINS-Corn futures drop to four-week low, soybeans
fall, on big grain stocks
Ida Aftermath Stymies Grain Exports as Trade Routes
Altered, China Eyes Brazil Soy
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