‘China factor’ changes corn market dynamics

Jan, 24, 2023 Posted by Gabriel Malheiros

Week 202304

Two months after authorizing corn imports from Brazil, China bought more than 1.1 million tonnes of the commodity from the South American nation. Similar shipments are expected to gain momentum this year, with sales to the Chinese amounting to between 3 and 5 million tonnes, putting Brazil on the list of high-ranking exporters to China.

“Brazil will be one of China’s top three suppliers as early as 2023, behind Ukraine and the United States, which will continue to be the main importer. We can overtake Ukraine, but much depends on how the war with Russia progresses. Ukraine should produce enough maize to maintain its second-place position in this ranking, but whether it will be able to ship it to China is debatable,” says André Pessôa, CEO of Agroconsult.

According to Paulo Molinari, an analyst at the consultancy Safras & Mercado, of the 18 million tonnes of corn that the Chinese will import in the current MY 2022/23, 15 million should come from the US and another 3 million from Ukraine. Brazil, according to him, can sell between 2 and 3 million tonnes, but this number should not change the final estimate of Chinese imports.

“China has reduced its imports for the past three years and has a record crop forecast. Brazil’s sales volume will be determined by how the harvest in China unfolds. However, it doesn’t mean that China will import more 3 million tonnes than they already do; instead, the supply will shift from the United States to Brazil,” Molinari explained.

Glauber Silveira, executive director of the Brazilian Association of Corn Producers (Abramilho), says that the potential of imports from the Asian giant could unbalance the market.

According to the director, if China buys large quantities from Brazil, at around 1 million tonnes per month, there will be a concern with internal stocks in large producing regions.

“It [China] has the potential to scare the market if it enters the market too abruptly in terms of imports. I’m not saying there will be a corn shortage, but 30 million tonnes of an estimated 40 million tonnes have already been negotiated. This means that those who prefer to negotiate corn later in the year will have to look for it deep in the country and will end up paying more, and, adding logistical difficulties, it may even be unfeasible.”

Now see below a chart displaying the exported volume of corn (hs 1005) from Jan 2019 to Nov 2022, according to the DataLiner market intelligence tool by Datamar.

Brazilian corn exports | Jan 2019 – Nov 2022 | WTMT

Source: DataLiner (click here to request a demo)

According to an estimate by the United States Department of Agriculture (USDA), Brazil should export 47 million tonnes of corn in the 2022/23 season, 500,000 more than the previous harvest.

Source: Valor Econômico 

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