Top corn importer China could cancel more purchases of the grain from the US because the country can buy more cheaply from Brazil and as some local producers of hog feed replace corn with wheat in their rations.
Corn futures in Chicago have come under pressure from Chinese cancellations of 832,000 tons in the past three weeks. Increased competition from Brazil is underscored by forecasts for it to pass the US as the top exporter this year.
China went on a corn buying spree in March, with purchases of almost 4 million tons announced by the US government between March 14 and April 14. But US corn is now less competitive, with supplies from Brazil about $30 a ton cheaper for delivery in the third quarter, traders said. Weak domestic demand for corn as animal feed is also a reason behind the cancellations.
“Demand for corn is really poor,” said Wang Xiaoyang, a senior analyst with Sinolink Futures in Henan, one of the top grain-growing provinces. “Feed producers are using a lot of wheat to replace corn as prices keep falling.”
Wheat prices are about 180 yuan ($26) a ton cheaper than corn in Henan, and they may decline further as a bumper harvest is about to arrive on the market. Wheat also has a higher protein content than corn, and can also be used to replace some of the soybean meal used in feed.
Struggling hog farmers are doing all they can to cut feed costs, so replacing corn with wheat is a natural choice, traders and analysts said. The economy is also taking longer than expected to recover from Covid, which is affecting restaurant demand for food and consumption of corn for starch.
The country’s corn imports hit a record of over 28 million tons in 2021, before dropping to about 21 million tons last year, according to customs. Inbound shipments were 7.5 million tons in the first three months, up 6% from a year earlier, with most of the cargoes coming from the US, Brazil and Ukraine.
The cancellations come as China expects a bumper corn crop. Farmers in the northeast, the top production region for corn and soybeans, are more inclined to grow corn this year due to higher profits and easier management, CITIC Futures said, despite a government push to grow more soybeans.
