China boosts US agriculture purchases over ‘very tight’ soybeans supply concerns, Ukraine corn worries
- Chinese buyers recently booked around 20 cargoes of American soybeans and around 10 shipments of corn
- Worries over supplies grow following Russia’s invasion of Ukraine and weaker-than-expected supply from Brazil
China is scooping up corn and soybeans from the United States as part of efforts to mitigate the risks to commodity supplies from Russia’s war in Ukraine and slower harvests in South America.
Chinese buyers recently booked around 20 cargoes of American soybeans and around 10 shipments of corn, according to traders who asked not to be identified as they are not authorised to speak publicly.
The buying spree reflects robust demand in the top importer as worries over supplies grow following Russia’s invasion of Ukraine and weaker-than-expected supply from Brazil, the world’s biggest soybean producer.
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Through December, the US exported US$34 billion of agriculture to China, short of the US$40 billion target, according to US Census Bureau data.
Russia and Ukraine are among the biggest exporters of major grains like wheat and corn, and also vegetable oils used in cooking.
As shipments from the two countries grind to a virtual standstill, prices of many agricultural commodities have soared.
The current soybean supply situation in China is very tight right now, and soybeans from the Pacific northwest would be the fastest option to bring in supplies,
China is a major buyer of corn and barley from Ukraine, as well as sunflower oil from both Ukraine and Russia.
Benchmark soybean futures were steady in Chicago after jumping as much as 2.2 per cent on Thursday. Corn extended gains to the highest since 2012.
The US soy purchases are for shipment from May onwards, the traders said. That is unusual as Brazilian soybeans are historically cheaper than American for this time of year, right after the harvest that takes place in February and March and before the US harvest in October and November.
“The current soybean supply situation in China is very tight right now, and soybeans from the Pacific northwest would be the fastest option to bring in supplies,” said Darin Friedrichs, co-founder and market research director of Sitonia Consulting, a China-based agricultural information service provider.
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Prospects of a record Brazilian soy crop this year were shattered by weather woes that ended up delaying the harvest, and exports, far behind initial estimates.
This lack of immediate supply is seen on huge ship line-ups outside ports in Brazil as well in premiums for the crop.
Brazilian soybean future contracts from Santos are higher than those from the US Gulf this year – a sign that supplies from the world’s biggest producer and exporter are smaller and more demand should go to the US.
For corn, China is seeking to replace some supplies from Ukraine and also as a buffer against future production losses, the traders said.
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Ukrainian corn is usually planted in April and May, and the ravages of war, a shortage of farm workers and chaos around transport and logistics may put those crops in jeopardy.
Brazil, usually the third or fourth biggest corn exporter, is struggling to replenish depleted stocks after a smaller-than-expected second corn crop harvest last May.
The US Department of Agriculture has lowered Brazil’s corn crop estimate to 114 million tonnes from its initial 118 million estimate.
Top officials have issued orders to ensure commodity supplies, sparked by concerns over Black Sea trade disruptions.
