Following a 2022 peak driven by compounding inflation, the Russo-Ukrainian war’s impact on Black Sea exports, and poor harvests in key export regions, global grain prices have steadily declined over the past two years. Grain production has expanded in many key regions, particularly in Brazil and the United States, the world’s leading grain exporters. They both share one trait, however, which is the dependency on Asian, and specifically, the Chinese market. With prices falling and supply chains normalising, the global grain market is slowly transitioning from a supply-constrained to a demand-driven market. In this new dynamic, the health of the grain trade will increasingly hinge on China’s domestic production and consumption patterns. China has historically been a vital soyabean importer on the international markets, making up around 60% of the global import demand for soyabeans since 2010. While its grain imports were historically limited to primarily soyabeans, this dynamic shifted in 2020 due to surging corn demand driven by the livestock industry’s growth. With domestic production unable to meet rising consumption, China’s corn imports skyrocketed from 7.6 Mt in 2019 to 29.5 Mt in 2020.
However, this new corn import demand has been slowly weakening back to pre-2020 levels, recording 23.4 Mt during the 2023-24 Oct-Sep season. The USDA now expects the current 2024-25 season to be even weaker at 14.0 Mt. There have even been statements from the Chinese government in regard to bridging this gap between consumption and domestic production, which historically has always been a priority for China; up until 2017, Chinese corn production had always either matched or exceeded the domestic demand.
Although China will be harvesting what should be its fourth consecutive record-large corn crop, the forecast is for another year of relative stability for imports; the demand growth is still strong enough to make it difficult for producers to catch up. While imports can be cheaper than domestic supplies as international prices push lower, government intervention could make this a nonfactor. Another downside to imports would be a possible resurgence of another major swine-fever-like event, bridging the gap between supply and demand. Similar to corn, China’s soyabean import demand for next year appears subdued. Over the past two years, soyabean imports have consistently exceeded crush demand, contributing to record-high stockpiles. As a result of record-level soyabean imports in 2024, current stockpiles have risen 18.2 Mt over the past two years from 27.5% to 36.3% of domestic use as of the end of the Sep-Oct 2023/24 season.
USDA’s expectation for next year is a correction in Chinese imports as a reaction to these rising stockpiles. The potential resurgence of trade tensions between the U.S. and China, such as renewed tariffs, could further strain the dry bulk market. However, China’s currently elevated soyabean stockpiles and soft feed demand provide a stronger buffer compared to the 2018 trade war. Before 2018, the U.S. supplied 35-40% of China’s soyabean imports, but this share had fallen to 25% by 2023, with latest 2024 trends suggesting a further decline to around 17%. Based on the current state of affairs, the Chinese soyabean market appears more prepared to withstand any trade disputes that Trump may bring to China. Corn imports — once mostly sourced from the U.S. — have shifted heavily toward Brazil, supported by China’s relaxation of GMO regulations. Since then, China has further relaxed its import rules, approving corn and wheat imports from Argentina and sorghum from Brazil.
By Hamid Agassi, Dry Bulk Analyst, Research, SSY.
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