The grain market experienced a downtrend globally during January-February, widening the spread against Chinese corn, which will likely spur more buying interest from China to meet a domestic supply shortage.
China's domestically produced corn has struggled to meet domestic consumption across the current marketing season given growth from industrial and feed consumption, even with record-high output achieved for 2023-24.
Domestic corn production so far has reached 288.84mn t for the October 2023-September 2024 cycle, up by 4pc from the 277.2mn t the previous year. But overall consumption has increased by 7mn t from a year earlier to 306mn t, according to the US Department of Agriculture (USDA). This indicates at least a 17mn t shortfall that needs to be fulfilled by imports, although increased output this year has narrowed the gap compared with previous years (see chart).
The USDA has projected increased consumption from the animal feed sector, up from 218mn t in 2022-23 to 225mn t in the current season as consumers opt for cheaper corn in their rations than other alternatives. Domestic corn industrial processors may also benefit from weaker prices because of the increased output, underlined by current higher operating rates (see chart). China's total demand, including industrial and feed use, may exceed current projections, resulting in a widening gap against production and prompting more imports.
Chinese buyers received lower indications for imported grain after the 10-16 February lunar new year holiday, following ample global supplies. Argus-assessed imported corn prices on a cfr basis fell from $260-270/t in early January to $240/t late February for near-curve shipments, the lowest indications of the past two seasons since October 2021 (see chart).
This saw import costs down by over 200 yuan/t in the past two months to around Yn2,000/t ($278/t) on 23 February taking a 1pc duty, a 9pc value-added tax and port charges into account. This widened the spread between domestic corn and imports to a two-month high of Yn470/t at south China ports.
Offer indications for barley, an alternative in feed rations, also dropped from $295/t in early January to below $250/t as of 26 February, following sufficient stocks at major sources in the northern and southern hemispheres. Falling prices globally have made barley more competitive against Chinese domestic corn in feed use, while imported sorghum also attracted Chinese interest in the industrial processing sector after indications fell from $325/t to $290/t in the past two months.
Corn price rises are likely from May onwards for domestic product given the current pace of consumption, which may further widen the spread between Chinese domestic and imported grain and prompt more purchases from Chinese buyers.


