China Likely to Cancel Additional US Corn Orders as it Shifts to Cheaper Brazilian Cargoes
China Likely to Cancel Additional US Corn Orders as it Shifts to Cheaper Brazilian Cargoes

China Likely to Cancel Additional US Corn Orders as it Shifts to Cheaper Brazilian Cargoes

  • 16-May-2023 12:00 PM
  • Journalist: Rene Swann

China: China, the largest importer of Corn, may further cut down its purchases from the US due to lower prices offered by Brazil, and as local hog feed producers switch to wheat in their rations. This has resulted in a reduction of 832,000 tons of Corn imports from China in the past three weeks, leading to a decline in Corn futures in Chicago. Forecasts suggest that Brazil might overtake the US as the top exporter of Corn this year, indicating tough competition for the US in the global market.

In March, China showed a keen interest in purchasing Corn and announced almost 4 million tons of purchases as per the US government's reports from March 14 to April 14. However, traders have indicated that US Corn is now not as competitive, with Brazilian supplies being around $30 cheaper per ton for delivery in the third quarter. In addition to this, the cancellations can also be attributed to weak domestic demand for Corn as animal feed.

The demand for Corn has seen a decline as prices fall, leading feed producers to adopt Wheat instead. In Henan, Wheat is currently being traded at a price that is cheaper per ton than Corn. Additionally, the upcoming bumper harvest is expected to further reduce Wheat prices. Compared to Corn, Wheat contains higher protein content and can be used as a substitute for some of the soybean meal commonly used in feed production.

Hog farmers who are struggling to cut feed costs are opting to replace Corn with Wheat, as it seems like a logical choice. The economic recovery from Covid-19 is taking longer than expected, which is impacting restaurant demand for food, leading to reduced consumption of Corn for starch. In 2021, the country set a record high for corn imports, surpassing 28 million tons. However, the import quantity decreased to approximately 21 million tons last year. In the first quarter of this year, inbound shipments increased by 6% from the previous year, amounting to 7.5 million tons, with most of the cargoes arriving from Brazil, Ukraine, and the US.

China is set to have a prosperous Corn crop, however, this news coincides with an increase in cancellations. The northeast region, responsible for most of the Corn and Soybean production, is favouring Corn due to its higher profitability and easier management, despite government efforts to prioritize Soybean growth.

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