CHICAGO (BLOOMBERG) – China is scooping up US corn and soybeans as part of efforts to reduce the risks to commodity supplies from Russia’s war in Ukraine and slower harvests in South America.
Chinese buyers recently ordered about 20 shipments of U.S. soybeans and about 10 shipments of corn, according to dealers who asked not to be identified. The buying song reflects robust demand in the top importer as worries about supplies grow after Russia’s invasion of Ukraine and weaker than expected supply from Brazil, the world’s largest soybean producer.
Food security is a critical priority for Beijing as the country’s imports of maize, soybeans and wheat have risen to record highs, increasing its vulnerability to trade tensions and supply shocks. Top officials have issued orders to secure commodity supplies, triggered by concerns over Black Sea trade disruptions.
Russia and Ukraine are among the largest exporters of large grains such as wheat and corn, and also vegetable oils used for cooking. As shipments from the two countries virtually come to a standstill, the prices of many agricultural commodities have risen sharply. China is a major buyer of corn and barley from Ukraine, as well as sunflower oil from both Ukraine and Russia.
These purchases come after the Phase 1 agreement between China and the United States expired without the agricultural targets being reached. In December, the United States exported US $ 34 billion (S $ 46 billion) of agriculture to China, below a target of US $ 40 billion, according to US Census Bureau data.
While both countries are talking about extending the agreement, it is expected that China will buy more US products to secure the necessary grain supply amid tight world stocks.
Benchmark futures for soybeans were stable in Chicago on Friday after jumping as much as 2.2 percent on Thursday. Maize expanded profits to the highest since 2012.
The U.S. soybean purchases are for shipment from May, dealers said. This is unusual as Brazilian soybeans are historically cheaper than American at this time of year, just after the harvest that takes place in February and March and before the American harvest in October and November.
The prospects for a record-breaking Brazilian soybean crop this year were shattered by the weather, which ended up delaying harvests and exports, far behind the original estimates.
This lack of immediate supply is seen on huge shipwrecks outside ports in Brazil as well as in premiums for the crop. Brazilian soybean futures contracts from Santos are higher than those from the US Gulf this year – a sign that supplies from the world’s largest producer and exporter are smaller and more demand should go to the US.
In terms of corn, China is seeking to replace some supplies from Ukraine and also as a buffer against future production losses, traders said. Ukrainian corn is usually planted in April and May, and the ravages of war, shortage of farm workers and chaos around transportation and logistics can endanger these crops.
Brazil, which is usually the third or fourth largest maize exporter, is struggling to rebuild depleted stocks after another maize harvest that was smaller than expected in May last year. The U.S. Department of Agriculture has lowered Brazil’s estimate for corn crops to 103 million tons from the original estimate of 107 million.