The weather in South America, according to analysts, is one of the main factors behind the rise in grain prices in recent days. Corn and soy are now the highest prices in a few months and the Chinese government has not missed that.
Large parts of South America suffer from extremely dry and hot weather. This mainly occurs in the south of Brazil and parts of Argentina, precisely the regions where most corn and soy are grown. According to local sources, the consequences of drought stress are already visible on the crops. This will not change in the near future because the weather reports predict no significant rain this week. Experts fear that the La Niña weather phenomenon could cause a prolonged period of extreme drought. That would significantly reduce yields, especially in areas where the consequences of drought stress are already visible.
China's production goals
China, which is now largely dependent on the import of soy from North and South America, among other things, sees supplying sufficient grain as one of the most important goals for the coming year. Xi Jinping announced this last weekend during the annual rural development conference. To this end, the country wants to keep corn production at least the same as last year and significantly expand soy production. "Protecting a safe grain supply and protecting our agricultural and related sectors is a top priority," Tang Renjian, China's agriculture minister, told the Communist Party-affiliated People's Daily. “Agriculture departments must make every effort for grain production with the attitude of a life-or-death struggle.”
Food security is a policy spearhead for the government of the country with the largest population in the world. The sharp decline in soy yields - partly because farmers prefer to grow corn for higher returns - last season does not fit in with that strategy. The sowing of winter wheat in October also did not go according to plan. Due to excessive rainfall, sowing was delayed and although it was possible to get the wheat in the ground on time, the humid conditions resulted in relatively high disease pressure. The Chinese Ministry of Agriculture wants to keep grain production stable and is making the cultivation of oilseed crops a top priority. In addition to soy, the government pays extra attention to developments in the cultivation of rapeseed and peanuts.
New market for Russia?
Switzerland-based grain trader Solaris, which is a major player in the trade of Russian wheat, is confident that China will become a major buyer of wheat from Russia in the future, the company told Reuters. “China is a strategic market that we are targeting for the export of Russian wheat and Solaris is confident that China will soon become an important buyer,” Josh Martin, CEO of Solaris, told Reuters. “Solaris has always been focused on expanding the traditional markets for Russian wheat such as Turkey, Sudan, Tanzania and Egypt as well as opening new markets, as recently done with Algeria and Pakistan.