With current tensions between the U.S. and China combined with the sharp increase in Chinese corn supplies, there is at least reason to be concerned.
By Richard Brock, Brock Associates
The recent infiltration of the Chinese “spy” balloons over U.S. territory causes at a bare minimum, concern about our continuing relationship with China. The good news is that they need us, and we need them. So let’s hope that calm attitudes prevail and we don’t end up in a military conflict with China. There would be no winners.
China has long had a policy that they want to be self-sufficient in corn production while importing substantial amounts of soybeans from both the U.S. and South America. As the chart below shows, China bought 30 million metric tons of corn in 2020/21 (about 1.18 billion bushels) with more than 2/3 of that (842 million bushels) coming from the United States.China’s total corn imports this year are expected to be substantially less. As of mid-February, total U.S. corn commitments to China are down 63% versus a year ago.
An important number to remember is the gargantuan size of China’s corn inventory. China’s projected 2022/23 ending stocks are 206 million metric tons, or a staggering 69% of usage.For comparison, the U.S. corn ending stocks-to-usage ratio is projected to be just 9.6% this year. China started piling up corn in about 2013. That resulted in corn supplies that could now nearly get them through a whole year of usage without buying any corn.Is this a strategic plan? Is it a cushion in case military conflict does break out? How much of this corn is even in good enough condition to use?
No one knows the answers to the above questions. But it certainly does make one stop to think what their long-term game plan is by putting so much corn in storage. The United States used to have a similar plan after World War II until Earl Butz came along as Secretary of Agriculture and auctioned off all the government grain. That was in the 1960s.
The next couple of months are critical. Back in 2020/21, China’s corn purchases from the U.S. for that marketing year more than doubled from mid-January to mid-March.
If China is going to purchase corn this year, it had better start soon. It is certainly possibly that they are well satisfied with their current supplies which appear to be more than adequate, if not burdensome.
The Bottom Line
With current tensions between the U.S. and China combined with the sharp increase in Chinese corn supplies, there is at least reason to be concerned. As stated earlier, both countries have too much to lose if a military conflict does occur. Let’s just hope that cool minds and calm nerves prevail.
