China continues to ramp up its purchases of feed grain around the globe with even more expected in the coming weeks. Bloomberg recently reported China has purchased more than 20 cargoes of feed grain in just the past two weeks, which totals 1.2 million tons of grain.
From corn to sorghum to even barley, China continues to buy feed grains. Last week, trade sources said China was pricing corn out of the Pacific Northwest; however, no daily sales have been confirmed. Then, more recently, trade sources report China purchased 10 cargoes from Ukraine.
No matter the source of the surge in purchases, one thing is clear: China is stockpiling grain.
“They're buying a little corn, but they're mostly buying from Ukraine and buying from Brazil right now,” says Arlan Suderman, Chief Commodities Economist for StoneX Group. “When you look at where U.S. corn is priced, it’s about a 25 to 30 cents higher price than Brazil corn. But Brazil is starting to switch towards soybeans. So that's good news for the U.S.”
China is Buying from Ukraine
Suderman points out China is buying from Ukraine, despite the growing risk in the Red Sea. He also points out StoneX Group estimates China just harvested a large crop, so it's not like they're buying due to a lack of grain or feed.
Suderman says that begs the question: why is China even buying all of this grain? He says it’s to build up their reserves, which he claims is taking place for nearly every major commodity, including corn, soybeans and even crude oil.
“They are buying corn from their farmers, putting it in reserves to try to prop up the price, and by propping up the price, they're making the arbitrage work for importing corn. So, they're continuing to do that and they're buying grain sorghum for feed as well. They're buying up commodities building up reserves,” Suderman says.
What About Taiwan?
Chip Flory, who is host of AgriTalk, but also the Farm Journal economist, says the fact China is buying so many different commodities also sparks another question: what is China preparing for?
“When they shift gears and start to accelerate their purchasing, you have to ask the question: ‘Why? Why are they doing it?’ So, if they are accumulating all these commodities, what are they prepping for? Is Taiwan involved in this? It could be something that we're going to have to watch very closely,” says Flory.
EDITOR’S TAKE:
Those quoted in the article raise a very important question – why is China purchasing all this grain and stockpiling it? The fact that they are buying grain from around the globe is good. It would be nice if they purchased more from the U.S., but lowering available stocks of grain ultimately creates market opportunities for our farmers with grain to sell. Taking available grain off the market ultimately places a higher floor under the particular grain in question. All of this will help U.S. grain prices in the end. There is no question that China has a food production problem and cannot feed its population without importing grain. It will be interesting to see if this buying spree continues. In the interim, our grain producers will continue to sell their product to the highest bidder. They will, in turn, be looking for those new trucks and SUV’s from your lot. Why not invite a few of those farmers/ranchers into your dealership on Tuesday, March 19th as you celebrate National Ag Day by tuning into the AgRally four-hour extravaganza on RFD-TV and The Cowboy Channel. It’s a great way to show your respect for everything our farmers/ranchers do for this country!
