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"The magnitude of soybean and wheat
imports by China and the level of Chinese corn exports have the
potential to significantly influence prices in the current
environment of tight world grain stocks," said Darrel Good.
Good noted that to date most of the
focus has been on the large sales of U.S. soybeans to China. Two
months into the 2003-04 marketing year, exports and outstanding
export sales to China totaled 218 million bushels, compared with
about 84 million bushels on the same date last year. Only 54 million
bushels of that total had been shipped as of Oct. 30.
"In addition, outstanding sales to
unknown destinations, which may include some sales to China,
remained large at 100 million bushels, compared to 86 million at the
same time last year," said Good. "For the year, the USDA has
projected Chinese soybean imports from all origins at 753 million
bushels -- about unchanged from imports of a year ago. That
projection, however, may change in upcoming USDA reports.
"The rapid pace of Chinese purchases of
U.S. soybeans in the face of larger South American soybean stocks,
prospects for a significant increase in South American production,
and rising prices has been a surprise," he said. "With the need for
a large decline in the rate of consumption of U.S. soybeans, China's
import purchase decisions will be extremely important."
China has been a large net exporter of
corn in recent years. Those sales totaled 130 million bushels in
1998-99 but grew to 570 million bushels in 2002-03. For the current
year, the USDA has projected Chinese corn exports at only 312
million bushels, due to declining supplies.
"So far this fall, Chinese corn exports
have been large, so the market is expecting a sharp decline in such
exports sometime early in 2004," said Good. "There is some potential
that China could emerge as an importer of corn in the near future.
The market will be monitoring the activity of major importers of
Chinese corn, particularly South Korea, for indications of a return
of those countries to the U.S. market."
For the current year to date, U.S.
export sales have increased significantly to Japan, Taiwan, Egypt
and Mexico. No significant sales have been made to South Korea, but
sales to unknown destinations as of Oct. 30 were relatively large,
at 81 million bushels.
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In addition, under the USDA daily
reporting requirements, exporters reported a sale of four million
bushels on Nov. 10 to unknown destinations. These sales to unknown
destinations fuel speculation of sales to South Korea, to other
recent Chinese customers or even to China. With export commitments
of U.S. corn already running about 32 percent ahead of last year's
pace, compared with the USDA's projection for a 12.5 percent
increase for the year, the corn market will continue to react to
export news.
China has not been a major participant
in world wheat trade in recent years, Good said. In the 2001-02
marketing year, China exported an estimated 55 million bushels of
wheat and imported an estimated 40 million bushels. Last year,
Chinese exports were estimated at 63 million bushels, and imports
were estimated at 16 million bushels.
For the current year, the USDA has
projected a continuation of that pattern: exports of 48 million and
imports of 18 million bushels. Through Oct. 30 (the first five
months of the 2003-03 marketing year) the USDA reported that China
had imported, or purchased for import, 10.5 million bushels of U.S.
wheat. Cumulative purchases a year ago totaled only 1.8 million
bushels. Outstanding export sales of U.S. wheat to unknown
destinations as of Oct. 30 were reported at 30.4 million bushels, up
from 8.2 million bushels on the same date last year.
"There continues to be speculation that
China may import 70 [million] to 100 million bushels of wheat this
year," said Good. "That speculation, along with dry weather in major
U.S. winter wheat producing areas, has contributed to the recent
60-cent rally in wheat futures."
However, Good added, the trade
decisions by China are not the only factors that will influence
prices in coming weeks. USDA's new production forecasts for the U.S.
corn and soybean crops to be released on Nov. 12 could be important.
"The market is generally expecting a
slightly
smaller forecast for the 2003 U.S.
soybean crop and a larger forecast for the corn crop," he said. "In
addition, the progress of South American crops will be extremely
important for demand prospects for U.S. soybeans and, to a lesser
extent, U.S. corn.
"However,
the demand side of the news will likely be dominated by China for
the next several weeks."
[University
of Illinois news release]
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