China's corn appetite fuels record sales, boosts farmers
The U.S. has booked sales of 697 million bushels of corn to China as of Feb. 11, versus a mere 2.4 million bushels at the same time last year — a dramatic turn of events for both the corn markets and the U.S.-China ag trading relationship.
Similarly, U.S. sorghum sales to China as of Feb. 11 have surpassed 197 million bushels versus just 23.5 million bushels at the same time last year, now accounting for 85 percent of total sorghum leaving the country.
These purchases lead a trend of improving grain-product demand from the world's largest country by population, and they are giving farmers new optimism after a period marked by trade policy challenges, COVID-19-related losses and fledgling global demand.
“We're up to 17.7 million metric tons of U.S. corn sold to China, just leaps and bounds ahead of last year and really any year with China that we’ve seen on record. It’s caused an explosion in overall corn exports," said U.S. Grains Council President and CEO Ryan LeGrand in a recent interview with the NAFB News Service.
"The total that we’re looking at right is about 57 million metric tons of U.S. corn sales booked for this marketing year. When you compare it to last year at this time, we’d only sold about 23 million metric tons. We’re just very far ahead of last year and very pleased to see that.”
The council's staff following dynamics in China from both Washington and Beijing attribute this strong demand to high import margins achievable by importing U.S. corn to China, which are, in turn, due to lowered grain stocks and a swine sector that is professionalizing as it rebuilds from African Swine Fever.
The Phase One deal between the U.S. and China, inked in January 2020, led to initial buys in late spring, but the eye-popping, million-ton-plus sales of U.S. corn seen in recent weeks are due to market demand. This has led the country to surpass its tariff rate quota, which establishes the amount of corn that can be imported under a low tariff, for both public and private entities in the 2020 calendar year and into 2021.
Sorghum, which is imported into China by the private sector, is also booming, with sales up more than 600% in the 2019-20 marketing year.
In part due to the high cost of local feedstock, Chinese buyers have also shown new interest in U.S. ethanol to help meet provincial E10 policies. U.S. ethanol had largely stopped flowing to the country after March 2018. According to USDA, the U.S. exported 21.1 million gallons to China in November and December 2020 combined, the largest volume of sales to that market in nearly two years. Market participants have reported other sales of 200 million gallons.
"It’s very exciting to see that China is back in the market for U.S. ethanol. We know that Chinese buyers recognize the octane value that U.S. ethanol has, and we look forward to serving those needs, going forward," LeGrand said.
Distiller's dried grains with solubles (DDGS) — once the feed product Chinese livestock couldn't get enough of — are still impeded by tariffs and duties following both anti-dumping and countervailing duties cases there.
Still, in the coming months, China should start to buy new crop U.S. corn to add to new crop U.S. sorghum sales already on the books. That would portend longer-term demand and a more solid trading relationship that will continue to contribute positively to U.S. grain markets — and U.S. farmers' bottom lines.
LeGrand is President and CEO of the U.S. Grains Council