CHINA – China becomes the largest buyer of corn and sorghum from USA after it had purchased 8.733 million metric tons of U.S. corn and 1.365 million tons of U.S. sorghum for the 2020/2021 marketing year, as of Aug. 27, 2020.

September 1 marked the start of a new crop marketing year and China is already on the books as the largest buyer trend that could continue through the 2020/2021 marketing year based on supply and demand factors.

These sales add to 2.312 million tons of U.S. corn and 3.932 million tons of U.S. sorghum purchased in the prior marketing year, much of which has shipped in the last few months.

“China has been a major importer of feed grains over the last several years,” said Bryan Lohmar, U.S. Grains Council (USGC) director for China.

“China has been a major importer of feed grains over the last several years,”

Bryan Lohmar – U.S. Grains Council (USGC) director for China

“Corn imports have been restricted by the tariff rate quota (TRQ), meaning these imports have been sorghum, barley and other feeds that can be used in lieu of corn. But with dwindling supplies in the temporary reserves and high domestic prices, supply and demand factors indicate more imports of corn and sorghum will likely occur.”

The U.S. and China governments signed the Phase One trade deal in mid-January. After the terms took effect one month later, importers were able to obtain exclusions for corn and other agricultural products from retaliatory tariffs imposed on agricultural products in July 2018.

These exclusions made U.S. agricultural products more competitive in the Chinese market. Corn sales to China, however, are still restricted by a 7.2 million-ton tariff rate quota (TRQ).

The TRQ allocates 40 percent of corn imports to private end-users (2.88 million tons). The rest – 4.32 million tons or 170.07 million bushels – is reserved for state-owned enterprises.

“While there are rumors that China’s primary state-owned trading company was given additional import quota above the 7.2 million-ton TRQ for corn this year, it is not entirely clear that is the case,” Lohmar said.

“The quota is allocated according to calendar year (January to December) while U.S. sales are reported by marketing year (September to August), causing disconnects about allocation of the TRQ.

“Private TRQ holders this year and past years have filled their quotas, indicating strong demand and price competitiveness for imported feed grains in the China market.”

Lohmar added that they don’t know how much of the 2020/2021 marketing year purchases will be shipped before December, meaning they would be applied to the 2020 TRQ. It is likely, however, that there will be shipments before the end of the year, indicating that additional corn TRQ was allocated this year.

Despite these restrictions, supply and demand factors within China point to continued purchasing of corn and sorghum.

“With large portions of the corn temporary reserves sold, it seems there is additional demand for imports,” Lohmar said. “Those imports will likely be corn because global exportable supplies of alternative grains are limited. But we expect U.S. sorghum to also fill these demand needs.”

Further supporting continued purchases are Chinese domestic corn prices, which have rallied much of the year despite robust sales of corn from the reserves over the summer.

In northeast China, corn prices rose nearly 30 percent between December and mid-August and more than 20 percent in south China over the same period, opening a wide margin for imported corn.

These prices have softened some in recent weeks under pressure from corn from reserve sales moving into the market and large imports on the books, but still well above levels seen last fall.

Liked this article? Subscribe to Food Business Africa News, our regular email newsletters with the latest news insights from Africa and the World’s food and agro industry. SUBSCRIBE HERE