Surge in Chinese Imports... Corn Prices Reach Highest Level in 8 Years

China culled hundreds of millions of pigs in 2018 due to African Swine Fever
Demand for feed grains surged amid efforts to increase pig farming numbers

[Image source= Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] International corn prices have soared to their highest level in eight years due to China's large-scale imports.

According to major foreign media on the 12th (local time), corn prices, which were below $4 per bushel in early October last year, have surged past $5 per bushel this year. This is because China's corn import volume last year more than doubled compared to 2019.

China originally imported a large amount of soybeans for livestock feed. However, recently, corn imports have also increased significantly. China's corn imports have continued this year as well. According to the U.S. Department of Commerce, on the 29th of last month, a contract was signed to export 2.1 million tons of corn to China, which is the second-largest daily contract volume ever since Russia imported 3.7 million tons in January 1991, and the largest contract volume with China. China purchased 11 million tons of corn last year, of which more than one-third was bought from the U.S. Considering the current import scale, China is expected to become the world's largest importer of both soybeans and corn this year.

It is analyzed that the reason for the sharp increase in China's grain imports is because they are increasing the number of pigs raised again. China culled hundreds of millions of pigs in 2018 due to the spread of African swine fever.

China originally operated corn production promotion policies such as minimum purchase price systems to achieve self-sufficiency. However, as corn stocks increased massively, these policies were discontinued. Consequently, corn farms decreased, and during the process of increasing pig farming again, corn supply became insufficient.

International Corn Price Trends [Image Source= Bloomberg]

While demand for livestock feed for meat is increasing, domestic production has not yet sufficiently increased, so the gap between China's corn production and consumption is widening. Peter Meyer, an analyst at S&P Global Platts, predicted that the gap between production and consumption would be around 30 to 32 million tons in 2021-2022. Market insiders believe it will take several years for China's corn production to recover to past levels.

Wuhan Luciano, CEO of U.S. agricultural commodity brokerage ADM, predicted that China will import 25 million tons of corn over the next few years. Luciano said, "I believe China's stock levels are much lower than what the market is currently reporting." Michael Magdovitz, senior analyst at Rabobank, also predicted that the bull market will continue until 2030 due to Chinese demand.

However, there are also forecasts that China's large import volume will be temporary. Currently, China's massive imports are attributed to last year's typhoon and drought that hit the northeastern region, a major corn-producing area in China. A farmer in Heilongjiang Province said that last year's corn harvest was only one-fifth of that in 2019.

There is also analysis that Chinese farmers, expecting further price increases, are withholding corn from the market. Consulting firm Subprime China Information stated that private brokers are holding at least 100 million tons of corn, and if they start releasing these stocks to the market, the currently soaring corn prices are expected to decline.

This content was produced with the assistance of AI translation services.