China, Beef, and Corn

China purchased a record $35.9 billion in ag products from the U.S. in 2021. That was a roughly $7 billion, or 25%, increase from 2020 activity and the previous record of $29.0 billion (2013). This article looks at the commodity-level changes in purchases.

Sources of Change

It’s been no secret that China has been making large purchases of U.S. corn, but the uptick in corn purchases was $3.9 billion higher from 2020 to 2021. These purchases are significant as they are (1) more than half of the total $7 billion increase, and (2) a massive uptick from China’s recent corn purchases. In total, China has purchased $5.1 billion of U.S. corn in 2021, up from $1.2 billion in 2020 and $55 million in 2019. Previously, China’s corn purchases exceeded $1 billion in 2012 ($1.3 billion).

The second major contributor to China’s record purchases was beef. In 2021, China purchased a total of $1.6 billion worth of U.S. beef, only slightly behind its pork purchases ($1.7 billion). Activity in 2021 was nearly $1.3 billion higher than in 2020 ($310 million).

Taken together, 72% of the $7.1 billion in new purchases came from corn and beef. While these two commodities might not come as a surprise, keep in mind China bought very little of these commodities in recent years. From 2010 to 2020, China purchased a total of $5.7 billion of U.S. corn and beef. To clarify, that’s the cumulative purchases of both commodities over 11 years. For context, combined purchases of beef and corn were nearly $6.7 billion in 2021. In other words, China bought 18% more beef and corn in 2021 than it did in all the preceding 11 years. The magnitude and short time frame in which these changes took place are hard to contemplate and put into an appropriate scale.

Exports Didn’t Increase for Every Commodity

There are two additional insights. First, not every commodity saw an increase in purchases. China’s pork purchases were nearly $600 million lower, as China recovered from the African Swine Fever (ASF) induced supply shocks. Cotton purchases also turned lower.

Second, China’s soybean purchases were essentially unchanged between 2020 and 2021. This is perhaps the biggest surprise in the data. Typically, soybeans account for 50% of China’s total purchases, so it’s a bit of a surprise that total purchases hit all-time highs and the largest single-commodity purchased didn’t meaningfully contribute to the surge. The combination of corn and beef purchases increasing as soybeans stayed unchanged resulted in soybeans accounting for only 39% of China’s total U.S. ag purchases in 2021.

Wrapping It Up

The majority of China’s new purchase record came from two commodities that China purchased very little over just two years ago. It’s also noteworthy that China’s purchases of soybeans were largely unchanged.

It’s important to note that China’s record purchases in 2021 corresponded with a return of high commodity prices. This is to say, some of the increases were due to changes in the quantity purchased, while some of the changes were due to changes in the prices.

Where will China’s purchases go from here? As always, it will be important to keep an eye on soybean purchases, but also consider future purchases of corn and beef. It’s unclear, at this point, if corn and beef are a short-term phenomenon or the start of a new trend.

Editor’s Take:

China has long been a large consumer of pork and poultry for meat in combination with rice and vegetables. These statistics are rather revealing and demonstrate a possible shift in preferences by Chinese consumers. As stated in the article, it is too soon to conclude that these trends will persist, but rest assured, if history is any indicator based on other nations, the likelihood is pretty high the trends will continue. That would mean stronger demand for U.S. corn and soybeans for feed protein sources and increasing imports of U.S. beef. All good trends for our farmers and ranchers right here in America. More exports will signal more income and eventually stronger truck sales.