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Chinese Economics May Not Favor Export Sales Boom for U.S. Corn

As early as 1996 the U.S. Department of Agriculture (USDA) was predicting that China would soon be importing as much as 500 million tons of corn per year, the majority being from the U.S. And in the face of a maturing ethanol industry, corn growers saw China as a source of growing demand, much like the success seen in soybean trade.

However, challenges mounted against U.S. exporters in 2013 when China banned U.S. shipments of corn and DDGs containing Syngenta’s strain of genetically modified corn, MIR162. This ban was later reversed, but it appears that moving into the future, various other factors are in motion that could create even greater challenges to U.S. exporters.

Just four years ago almost all the corn shipped to China originated in the U.S., however today competition for market share is heating up as China is buying from the Black Sea and will be buying from South America, as well.

Feed manufacturers in China would like easier access to U.S. corn, as China is still artificially supporting domestic prices to support rural economies, and limiting corn imports through quotas, which for 2015 will be 285 million bushels. But in order to earn a share of the quota, processors must first buy corn from China’s reserves, making it not only expensive, but of lower quality than imported corn. Thus, the more corn China imports, the more it must also buy from its own farmers.

Poor disease control damaging growth in China’s hog and poultry industries, and the slowing in growth of China’s gross domestic product (GDP), which has fallen from double digits to a forecasted average by the USDA of 7.2% over the next ten years, (and as low as 4% by others in five years), combined with an increase in Chinese yields and new emerging crop technologies on the horizon, could all combine to mean lower Chinese grain imports for the foreseeable future.

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Lynda Kiernan is Editor with HighQuest Group Media and of the Oilseed & Grain News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@highquestgroup.com.

©2017 HighQuest Group. All rights reserved.

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