Despite Rising Tensions, Here's Why China is Ramping Up Its Ag Buys
by Tyne Morgan, AgWeb
Jul 24, 2020
China continued to ramp up its purchases of U.S. ag products this week, including close to 1 million metric tons of soybeans. That marks the largest weekly new crop sales to China in nearly four years. So, what’s driving those buys? U.S. Farm Report analysts say it’s not because the country is trying to live up to its Phase One trade agreement promises. Instead, the buys are because China needs more of the U.S. crop.
“This is always a thing with China,” says Mike North of Vault Ag. “Watch what they do, not what they say, and as you look at the landscape, we already know that they leaned in heavy on South American supplies. We know that South America, specifically Brazil, got heavily committed with their sales and really, for China's sake, they need to start coming to the United States to buy soybeans – whether they want to, whether they like to, or not – and that really has opened the door for multiple days with solid sales and a large one here Thursday morning.”
While sales of corn seemed to slow this week, there was talk China was shopping around for more corn as well as wheat. However, with the recent buying spree from China, the country is nearing its quota. Unless China raises its tariff-rate quotas (TRQs), it may be at a ceiling on what the country buys, which may be a possibility.
“I think whenever you look at what China is doing, for instance, they're putting all this corn out on their government auctions every week since the middle of May,” says Matt Bennett of AgMarket.Net. “They've auctioned off anywhere from 36- to 40-million metric tons of corn. Then, you look at interior Chinese corn prices and they are sky high – significantly higher than what they can buy it off of us and ship it into China.”
Bennett thinks those high corn prices in China could drive the country to step in and buy more U.S. corn. If that happens, Bennett thinks it could spark higher corn prices, but the wet blanket on the market today is the growing size of the U.S. corn crop. Bennett thinks that’s what’s keeping a lid on corn price right now.
“I think a big part of the problem is that if you continue to get rain, and you've got a pretty darn good-looking crop, and I would say most producers are going to feel awfully good about yield prospects,” says Bennett. “Now, not everyone feels that way. I understand that, but as a general rule, we got a pretty good start this spring. And then whenever you look at the radar, the last couple of weeks, we've been blessed with weather.”
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