China goes on US grain buying spree under the radar during government shutdown

PUBLISHED : Friday, 01 November, 2013, 1:31pm
UPDATED : Friday, 01 November, 2013, 1:32pm

China and other big grain importers embarked on a corn and soybean buying spree during the US government’s 16-day shutdown last month, taking advantage of a lapse in mandatory reporting of their deals, data showed on Thursday.

Figures from the US Department of Agriculture, which had halted collection of required weekly grain export sales information during the shutdown, showed purchases in the three weeks to October 24 had far outstripped analysts’ expectations, despite weeks of market chatter about unusually large purchases.

“It does play out the notion that when nobody is watching, the Chinese will be in to buy,” said Citigroup futures specialist Sterling Smith.

Sales of corn and soybeans for the three-week period both topped 4.5 million tonnes, exceptionally high even on a pro rata weekly basis. A slump in prices that took benchmark US corn prices to their lowest in three years probably also spurred buying.

All sales to export US grain must be reported to the USDA on a weekly basis, and larger one-off deals must be reported daily. This system was instituted following the 1972 “great grain robbery” in which the Soviet Union quietly arranged a series of big export deals that drove up US prices.

But that system went on hold during the shutdown. Only on Thursday was the USDA able to release tabulated sales made during the three weeks up to October 24, publishing the data in a single batch rather than as three separate weeks.

It does play out the notion that when nobody is watching, the Chinese will be in to buy
Sterling Smith, Citigroup

Net export sales of soybeans for the current marketing year (2013/14) totalled 4,742,000 tonnes, well above the high end of a range of estimates at 3,000,000 tonnes.

China, the world’s largest buyer of soybeans, bought nearly half of the soy (2,112,300 tonnes), and there was a large sale of 550,800 tonnes to an unknown destination. Mexico, Russia, Indonesia, Taiwan and Japan also bought large volumes.

Corn sales likewise were huge at 4,555,500 tonnes for the current marketing year, nearly twice as large as the high end of 2.5 million in the range of trade estimates.

During the same three weeks last year, corn sales totalled only 476,938 tonnes and soybeans 1.78 million tonnes, USDA data showed.

“A big surprise were the very big sales to Mexico,” Smith said. “All in all, these export numbers should provide at least some support to the market.”

Japan was also a big buyer, and China purchased 777,600 tonnes of corn during the three-week period.

“Those are big export numbers, but the market reaction is muted,” a Chicago trader said.

Corn futures have fallen as US farmers continue harvesting an expected record bumper crop approaching 14 billion bushels.