FORT COLLINS, Colo. — China had been relatively quiet in the US corn market since its record buying streak last summer, but a string of much more expensive bookings this week would seem to be proof of the country’s dire need for the yellow grain.

No one knows exactly how big China’s corn stockpiles are, but the sudden deficit of usable grain in the country appears to have manifested in rising prices, extremely active state corn auctions and record imports.

The US Department of Agriculture (USDA) this week confirmed three separate sales of US corn to China for delivery in the 2020-21 year that ends on Aug. 31. Those sales total 3.74 million tons, or 147 million bushels.

One of those bookings, the 1.7 million tons announced on Thursday, is the sixth-biggest single-day sale of US corn in records back to 1977. Two of the July 2020 sales to China sit in the top five.

Frequent, large daily sales announcements, or flash sales, of US corn to China became common last July. But prior to this week, there had not been one explicitly to the Asian country since the 420,000 tons confirmed on Oct. 14.

Many analysts assumed China was sitting out due to high prices. By mid-October, US corn prices had risen at least 25% since Aug. 1 to the highest levels in more than a year. As of mid-October, year-end US corn supplies were seen 40% higher than the current expectation.

US prices are now around 30% above the mid-October levels and about 65% higher than on Aug. 1. But on the export front and compared with competitors, the US product is still the best deal around.

INTRIGUING POSSIBILITIES
Chinese corn prices started rallying in early 2020, before the US ones. Midway through last year, corn prices in China were up 15% on the year, reaching a 40% gain in mid-October. Dalian corn futures reached all-time highs earlier this month, up 50% from a year earlier, though they have backed off a bit since then.

But even as both have rallied, Chinese corn prices are about double the US ones and are trading at a premium not seen since Beijing in 2015 cut minimum price supports for Chinese corn farmers, before later eliminating them altogether.

China’s willingness to book so much US corn despite the high prices not only suggests the corn is needed, but it also opens a wide range of possibilities on the trade front. How much more corn does China need? Will it buy substantially more than anyone expected?

In terms of marketing year exports, US shipping capacity will somewhat limit the amount of corn that can reasonably go out by Aug. 31. March through June is when US corn shipments tend to reach their maximum, and this period should be especially busy this year given the historically slow pace of shipments versus sales.

USDA’s Beijing attaché this week maintained 2020-21 China corn imports at 22 million tons, some 4.5 million above USDA’s official estimate. Others see even higher possibilities, such as consultancy AgResource, which this week pegged that number at about 25 million-27 million tons.

AgResource and other firms have suggested China’s corn import demand will likely grow in the coming years.

RECORDS FALLING
Since mid-October, weekly corn sales to China have been light compared with volumes from previous weeks and months. Other commitments have chugged along at a steady pace since then, generally reaching at least average levels in most weeks.

As of Jan. 21, US corn bookings covered 75% of USDA’s record 2020-21 export forecast of 64.8 million tons (2.55 billion bushels), comfortably ahead of normal. But adding in this week’s flash sales, which total 4.06 million tons and include two sales to unknown destinations, boosts the percentage sold to at least 81%.

That is assuming that none of this week’s flashes were included in last week’s sales total. If they are all included in the current week’s total that will be reported next Thursday, it would make for a record weekly volume in net corn sales, old-crop plus new-crop, since at least 2008.

Whenever accumulated sales grow this large, there is always a risk of some cancellations. That could derail the impending weekly sales record, though there is no specific reason to believe cancellations were prominent this past week.

It is interesting to note that back in 2013-14, US corn export sales to China neared record levels early in the marketing year, though a large portion of those orders were eventually cancelled.

USDA earlier this month reduced the 2020-21 US corn export target by about 2.5 million tons based on smaller supplies. Given this week’s huge flashes, the agency is likely to face scrutiny from market participants if it does not raise the number in its next report due on Feb. 9. —  Reuters

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