(Bloomberg) — China, the largest corn importer, could cancel more grain purchases from the United States because the country can buy cheaper from Brazil and as some domestic producers of pig feed substitute corn for wheat in their rations.
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Chicago corn futures have been pressured by Chinese cancellations by 832,000 tons in the past three weeks. The growing competition from Brazil is underlined by the expectation that it will overtake the United States as the largest exporter this year.
China went on a corn-buying spree in March, with the US government announcing purchases of nearly 4 million tons between March 14 and April 14. But US corn is now less competitive, with supplies from Brazil about $30 a ton cheaper for US deliveries. Third quarter, traders said. Weak domestic demand for corn as animal feed is also a reason behind the cancellation.
“Corn demand is really weak,” said Wang Xiaoyang, senior analyst at Sinolink Futures in Henan, one of the largest grain-growing provinces. “Feed producers are using more wheat to replace corn as prices continue to fall.”
Wheat prices are about 180 yuan ($26) per tonne cheaper than corn in Henan, and may drop further as a bumper harvest is about to hit the market. Wheat also has a higher protein content than corn, and it can also be used to replace some soybean meal used for feed.
Struggling hog farmers are doing their best to cut feed costs, traders and analysts said, so replacing corn with wheat is a natural choice. The economy is also taking longer than expected to recover from Covid, which is affecting restaurants’ food demand and consumption of corn for starch.
The country’s corn imports hit a record high of more than 28 million tons in 2021, before falling to around 21 million tons last year, according to customs. Inbound shipments reached 7.5 million tons in the first three months, up 6% from a year earlier, with most shipments arriving from the United States, Brazil and Ukraine.
The cancellations come as China expects a bumper corn crop. CITIC Futures said farmers in the Northeast, the largest corn and soybean producing region, are more inclined to plant corn this year because of higher profits and easier management, despite government efforts to grow more soybeans.
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