China's Buys of Corn and Sorghum Are Surging Right Now, But Why?

China continues to ramp up its purchases of feed grain around the globe with even more expected in the coming weeks. On Monday, Bloomberg reported China has purchased more than 20 cargoes of feed grain in just the past two weeks, which totals 1.2 million tons of grain.

From corn to sorghum to even barley, China continues to buy feed grains. Last week, trade sources said China was pricing corn out of the PNW; however, no daily sales have been confirmed. Then, this week, trade sources report China is purchased 10 cargoes from Ukraine.

No matter the source of the surge in purchases, one thing is clear: China is stockpiling grain.

“They're buying a little corn, but they're mostly buying from Ukraine and buying from Brazil right now,” says Arlan Suderman, Chief Commodities Economist for StoneX Group.  “When you look at where US corn is priced, it’s about 25 to 30 cents higher price than Brazil corn. But Brazil is starting to switch towards soybeans. So that's good news for the U.S.”

China is Buying From Ukraine 

Suderman points out since China is buying from Ukraine, despite the growing risk in the Red Sea. He also points out StoneX Group estimates China just harvested a large crop, so it's not like they're buying due to a lack of grain or feed. 

“They are buying a lot of Ukraine corn, the key there is the Red Sea, because all that corn coming to Ukraine goes through the Red Sea or all the way around the southern end of Africa. And so that increases the costs. It's ironic that China is buying that corn, because they just had a bumper crop, based on our private sources in China, and our people there we believe the crop in China was bigger than even the government says that it was.”

Suderman says that begs the question: why is China even buying all of this grain? He says it’s to build up their reserves, which he says is taking place for nearly every major commodity, including corn, soybeans and even crude oil.  

“They are buying corn from their farmers, putting it in reserves to try to prop up the price, and by propping up the price, they're making it the arbitrage work for importing corn. So, they're continuing to do that they're buying grain sorghum for feed as well. They're buying up commodities building up reserves,” Suderman says.

What About Taiwan?

Chip Flory, who is host of AgriTalk, but also the Farm Journal economist, says the fact China is buying so many different commodities also sparks another question: what is China preparing for?

“When they shift gears and start to accelerate their purchasing, you have to ask the question: ‘Why? Why are they doing it?’ So, if they are accumulating all these commodities, the list that Arlan went through, what are they prepping for? Is Taiwan involved in this? It could be something that we're going to have to watch very closely,” says Flory.  

According to Blue Reef Agri-Marketing’s Chip Nellinger, the recent sell-off in the soybean market was partially tied to the lack of soybeans sales to China.

“It wasn't that they weren't buying beans, they’re buying in record amounts of South American beans, so their appetite is as strong or stronger than it ever has been,” says Nellinger. “It’s just right now, in the short-run, they’re not buying beans from us.”