China’s demand for corn remains strong and the U.S. continues to ship millions of tons of grain there. But Brazil is chipping away at that trade, and the South American ag giant shows no sign of slowing its advance.
It was in November that the Chinese market opened for the first time to Brazilian corn, and farmers and exporters are rushing to take advantage of the opening while the U.S. loses some market share that it controlled just a year ago.
It's been a little more than a month since Brazil and China finalized a sanitary and phytosanitary deal that allows corn trade between the countries, but trade is already exploding. That deal became effective on Nov. 22, and a lot of Brazilian corn is on its way to China as Chinese commitments to buy from the U.S. are dropping off, according to private shipping data and USDA data.
“That’s really opened up the floodgates,” said Collin Watters, director of exports and logistics for the Illinois Corn Marketing Board and the Illinois Corn Growers Association.
Right now, there are 22 vessels loaded with 1.2 million metric tons of Brazilian corn that are heading to China, says Luiz Carlos Pacheco, senior analyst for TF Agro Economica, a consulting firm in the southern state of Parana. Brazil is preparing to send another 800,000 tons to fill the recent order by COFCO, China’s state-owned grain company.
COFCO put in an order recently for 2 million tons of Brazilian corn for delivery through February and the company is expected to buy more soon, Pacheco told Agri-Pulse.
Before the deal between China and Brazil was finalized last year, China’s main options for corn imports were the U.S., Ukraine and Argentina, Pacheco said. Now, Argentina doesn’t have the corn, Ukraine has become very unreliable because of the Russian invasion, and prices are rising for corn in the U.S., where the dollar is very strong.
Just last week, USDA’s Foreign Agricultural Service announced that U.S. agricultural exports to China reached a record high for fiscal year 2022, but corn was one commodity that saw shipments decline. U.S. soybean and sorghum exports to China both hit new highs, but the value of U.S. corn exports dropped to $4.8 billion, down from more than $5 billion in FY 2021.
The FY 2022 total was still a strong performance — the second-highest ever — but the fiscal year ended Sep. 30, before Brazilian corn began flowing to China, taking new market share.
And while accumulated U.S. corn exports to China so far in the 2022-23 marketing year (September-August) have outpaced the same time period last year, FAS data show China has sharply reduced commitments for the rest of the year.
As of Dec. 29, outstanding sales of U.S. corn to China total just 292,000 metric tons. At the same time last year, China had committed to buying nearly 10 million tons of U.S. corn.
That’s a strong sign that China is buying a lot of Brazilian corn and intends to buy a lot more over the coming months, says John Baize, president of John C. Baize and Associates and a South American commodity analyst.
“It’s pretty simple,” says Baize. “Brazil has a lot of corn and they’re exporting it pretty cheaply. They’ve got the corn and need the cash. We should be very competitive in corn now, simply because we harvested not long ago.”
But it’s not that simple, says Watters. While the U.S. is just coming off a harvest, domestic demand is very strong and the costs of exporting remain elevated because shippers are still trying to recoup costs from heightened barge expenses on the Mississippi that began last summer when water levels dropped sharply. Those two factors, as well as the comparatively weak Brazilian currency, help explain why Brazil’s corn is more competitive.
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U.S. exporters are essentially bidding against the domestic market, Watters said.
“Domestic demand has been supporting U.S. prices and that’s hurting the export space,” he said. “There are feeders in Texas that right now are drawing corn out of Illinois because the crops were so bad in Kansas and Nebraska.”
As for China’s demand for corn, it’s also strong and will continue to be so, Watters said.
Collin Watters, Illinois CornChina, in reaction to its African swine fever outbreak, began buying extraordinary amounts of corn in 2019 to try to replace the practice of swill feeding, which the country blamed for spreading the virus. That, Watters said, led to a frenzy of immediate importing. The situation has calmed now, but China’s demand remained elevated.“The Chinese demand is going to be there because they did make the structural shift to a more professional, quality feed-sourcing framework,” he said.
And Brazil is expected to have a lot more corn next year after its second — and largest — crop, the “safrinha.” The safrinha, which accounts for about 70% of Brazilian corn production, is planted on soybean acres soon after the soy harvest, which has already begun.
Brazilian farmers, responding to rising domestic and international demand, are expected to plant about 5% more, or roughly 43 million acres, in the coming months, says Joana Colussi, a postdoctoral research associate at the University of Illinois. With good growing weather, Colussi says Brazil could produce 96 million tons of corn just in the second crop.
But that’s far from certain.
“A key factor in Brazil’s safrinha production is the timing of the onset of the dry season,” says Gro Intelligence. “If the dry season starts early or if safrinha is planted later than its typical January to February window, the probability of dry weather negatively impacting yields is higher.”
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