Porto Alegre, August 5, 2020 – Not only in relation to corn, but in several commodities, including the pork market, there is a great distortion between the official information from China, what the USDA shows in its reports, and what private Chinese consulting companies show in terms of supply and demand. The movement of sales in China, for the last few weeks, must be considered as a seasonal and normal procedure within the local market. China’s corn purchases of U.S. corn may seem to be abnormal, but within the needs of the trade agreement they seem logical. A readjustment of this information seems necessary to understand the ‘China’ effect within the current global corn market and for the coming years.
In the recent past, the Brazilian government, through Conab, had the practice of buying corn from producers in times of excess supply and reselling these official stocks to the market during the off-season. In other words, the government used to give support to the commercialization, but also collaborated for the regional supply in the off-season. The same is true in China. The local government absorbs corn from producers and then resells these stocks during the most critical supply periods for consumers. This is a normal and seasonal practice in China.
Prices in China at 2000/2300 yuan per kilogram mean nearly 18/20/60 dollars per 60-kilogram bag. For the Brazilian market, a really high price. For the Chinese market, a normal price for off-season periods. Corn is really expensive in China, but in a closed and state-controlled market. Imports are made through quotas, which limits private action to control local prices without official action.