September 2, 2020
Rising corn prices are fuelling food security worries in China, where food inflation has reached its highest level in over a decade and President Xi Jinping made a recent high-profile plea for an end to wastage.
The recent price surge in corn – imperative for China’s gigantic hog, dairy and poultry sectors – is the latest in a series of major issues that include a devastating pig disease, pandemic-driven upsets for international suppliers and warnings of a growing food supply gap.
Prices have soared as the country heads towards its first real corn shortfall in years in the upcoming 2020/21 season starting in October and looks likely to face a deficit of up to 30 million tonnes, around 10% of its total crop.
While This would be music to the ears of major exporters like the United States and Ukraine, it could threaten to push up global prices and have a knock-on impact elsewhere as some corn users switch to other grains.
Corn prices in Jiamusi at the heart of China’s grain basket hit a five-year high at 2,050 yuan (224.2 pounds) a tonne on Aug. 26, up 27% since the start of the year, before edging down in recent few days.
This has contributed to a continued rise in food prices, also aided by severe flooding in the south, pockets of drought in the northern grain belt, and a continuing pork shortage.
President Xi jinping highlighted concerns when he urged the nation to stop “shameful” food wastage, prompting many local governments to launch related campaigns.
Although, while China expects a bumper 2020/21 corn crop at around 266.5 million tonnes it’s still not enough to meet demand, according to the agriculture ministry, which forecasts year-end stocks of minus 16.7 million tonnes.
That shortfall could be up to 30 million tonnes, far exceeding China’s current import quota of seven million tonnes, a figure it has never filled.
China, meanwhile, has vowed to make record U.S. agricultural purchases this year as part of its Phase 1 trade deal, and made its biggest purchase of U.S. corn in a month last week as it looks to boost supplies.
And with Corn so cheap on the international Market , it’s fair to say it makes total sense for them to go down this route.
Asian Markets Specialist
Susan has extensive experience trading the commodity, bond and futures markets.
She currently specializes in the Asian markets and holds a BA of Finance & Economics.
Susan is a former analyst at FXStreet but currrently writes exclusively for FVPTrade.