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Volga Baikal AGRO NEWS Update on the Corn Market !!!
China may become the largest corn importer. It will change the global grain market.
As it became known to Reuters, the Chinese government may increase the corn import quota at minimum tariffs for 2021. In September, the government set this quota at the 2020 level, but due to increased demand for animal feed, as well as caused by storms and drought, the quota could be increased by 20 million tons from the current 7.2 million tons. This quota allows corn importers to avoid paying most of the customs tariffs, which reach 65%.
The increase in corn imports will make China the world’s largest importer of the grain, which, according to Reuters, could lead to higher world prices for corn and other grains. China is currently the second largest corn consumer after Mexico. According to the United States Department of Agriculture (USDA), Mexico imports 18.3 million tonnes of grain.
If China becomes the world leader in corn imports, it will change the global grain trade and encourage corn producers around the world to plant more to meet Chinese demand.
This has already happened with soybeans: after China in the 1990s. began to import this crop, farmers in Argentina, Brazil and the United States have multiplied the area under soybeans. “Over the next decade, China could change the landscape of the global corn market by boosting imports,” Terry Reilly, senior analyst at Chicago-based brokerage firm Futures International, told Reuters.
The aggregate annual demand for corn in China is 280 million tons and is mainly met by domestic production. Until now, Chinese importers have never chosen a full annual quota for corn imports at minimum tariffs of 7.2 million tonnes. However, according to Reuters sources, this year, Chinese importers have already ordered about 12 million tonnes of US corn and million tons from other countries, including Ukraine. According to the USDA, the United States has supplied only 3.7 million tons of this order so far.However, China is unlikely to refuse the rest of the order, because the January deal with Washington to end the trade war between the countries suggests that Beijing must additionally purchase US agricultural products for billions of dollars.
Left Picture: Corn production and consumption in China
Right Picture: Corn imports and acreage in China
Data Sources: U.S. Department of Agriculture, Reuters
Growth in global demand could have a positive effect on corn exports from Russia. “The record was set in the 2017/18 season, when we exported 5.7 million tons. Russia is experiencing significant competition in the Black Sea region, primarily from neighboring Ukraine, which exported record volumes of corn for the second year in a row – more than 30 million tons. which is incomparable with Russia’s export potential, ”Igor Pavensky, head of the Rusagrotrans analytical center, told Agroinvestor in March. Ukraine is now the fourth largest corn supplier on the world market after the United States, Brazil and Argentina. According to Pavensky, supplies from Ukraine go primarily to Egypt, China, the EU and Southeast Asia. According to the USDA forecast, Ukraine will export 32 million tons of corn this season, while the USA – 47 million tons, Brazil – 39 million tons.
