China has been particularly active in the grain market in recent months. In the 2019/2020 season, the country imported more than 6 million tons of grain, the highest volume in recent years. This season, too, plenty of maize and wheat are being shipped to the country. Where does this import urge suddenly come from?
Customs data shows that China imported 10 million tons of soybeans in July. This is 8,6 million tons more than the same month last year. Last month, soybean imports even reached a record level of 11,1 million tons. Maize imports for the month of July amount to 910.000 tonnes, which is an astonishing growth of 133% compared to last year.
It could be even crazier in terms of growth rates. Chinese wheat imports amounted to approximately 930.000 tons in July, an increase of no less than 323% compared to the same month a year earlier. Based on these new figures, analysts also expect that China will fully fill the annual tariff quota (import quantity without duties) for both corn and wheat this year for the first time.
Brazil is being bought empty
De import figures of China have been special all year round. At the end of July, wheat imports were already 116% higher than in 2019, bringing the total imports over the first 7 months to 4,28 million tons. Barley imports are now more than 16% ahead of last season and currently amount to 2,86 million tons. China's corn imports are about 31% ahead and amount to 4,57 million tons in the first half of the year.
The most notable is the import of soybeans. After the first 7 months, imports of this product are approximately 18% ahead of last year, at 55,1 million tons. The special thing is that the purchasing program from China ensures that Brazil is virtually bought empty. The combination of the falling Brazilian Real and very strong Chinese demand means that Brazilian farmers have already sold approximately 40% of their expected soy production for the 2020/2021 season. Last year it was 20%. The strong demand is one of the reasons why the soy quotation on the CboT is currently high.
Why so active?
But why is China suddenly so active in the grain market? The Chinese urge to import is driven, among other things, by the strong recovery of the Chinese economy. The economy suffered significant blows after the start of the corona crisis. The rebuilding of the pig herd as a result of the outbreak of African swine fever and the rebuilding of contacts that arose in the course of the trade dispute with the United States also play a significant role in the urge to import. In addition, China has been selling corn from state reserves since the end of May to control the domestic market. At the moment this is perhaps one of the biggest drivers behind the high imports.
Total sales of corn reserves currently amount to 56 million tons and sales are expected to continue until the new corn is available around October. It is striking that last week, for the first time in 14 weeks, not the entire supply was purchased, but 'only' 89%. This is expected to be due to the high corn price in the country itself. Analyzes suggest that ending stocks could drop to 95 million tonnes by the end of the season. That is less than 40% of the stock at the beginning of 2017. It is a result of recent flooding at a number of low-lying warehouses.
The big problem now is that demand from livestock farming is actually increasing. The result? That aforementioned high domestic corn price. The price is almost $100 above the import price. So it is more interesting to import corn than to get it from your own country. It also has analysts expecting cumulative corn imports this season to reach at least 15 million tons, with even 20 million and 25 million tons seen as possibilities. Especially when strong demand continues and world prices remain low compared to domestic prices.