The Debate Over China’s Corn Imports: Is the Buying Over?

Traders were disappointed in USDA’s report this week, as modest cuts to world stocks and the South American crop weren’t enough to keep the market momentum going.

USDA raised its estimate for China corn imports, a step some analysts think is just the start. Arlan Suderman of StoneX says there are two viewpoints on just how much corn China will import this marketing year. On U.S. Farm Report this weekend, Suderman pointed out one group thinks corn imports to China will go much higher, while the other group has reservations about China’s overall appetite and need for corn this year.

“We are taking the more conservative view,” says Suderman. “If  you buy into the much higher imports than what USDA is currently saying, you'll be in good company, and you can certainly justify that from the fundamentals.”

Suderman says the supply and demand signs from China signal USDA may be too low on its demand estimates for China, but possibly too high on production projections in the country.

“We think it's going to come down to the import rumors of being primarily perpetuated by a couple of grain companies who have something to gain from big imports,” says Suderman. “And exports very well may go up, but that would go against some major objectives of the Chinese Communist Party. And the Chinese Communist Party has a track record of standing in the way of some of its own agency objectives at times to reach those objectives. So, we think it's going to try to hold the line on those imports, probably closer to 12 million metric tons.”

Darren Frye of Water Street Solutions says he differs in opinion from Suderman. He thinks exports will grow, as China needs to the feed grain this year.

“I think what they're going to import from us may be closer to 20 million metric tons,” says Frye. “It depends how much wheat and rice they substitute. They have a huge rice reserve, but I do think that they're going to need more corn from us.”

USDA bumped China’s corn imports to 16.5 mmt on Thursday, but Frye thinks that’s just the start.

“I still think there's more to come there,” he adds. “I think they've only taken 11.3 so far. So, they have a lot more to take, and I think we're going to see that really pick up as we get into the spring of 2021, and maybe even through our summer, as we're really priced fairly in the world market right now.”

China’s growing appetite for U.S. corn and soybeans was evident in daily flash sales released each morning by USDA, However, those flash sales to China have slowed, and Mexico is stepping in to buy U.S. corn.

“I think Mexico is afraid that China will come in for big imports, and they're kind of hedging their bets and getting their extension,” says Suderman. “They've become a great customer. When you look at overall shipments though, right now they're trailing the seasonal pace that they need to be on to hit USDA target by 130 million bushels. That means if we're going to hit USDA’s existing target, we're going to be having to push at 90 million bushels a week out for a while later this year. It's possible, but it's going to be more difficult to do we're going to have to pick up the pace soon.”

Watch the full U.S. Farm Report marketing discussion with Darren Frye and Arlan Suderman.