Feeding the Hungry Dragon: China Changes Buying Tactics in Volatile Phase of U.S. Grain Run

Key Points

• Since mid-2020, China has purchased large quantities of U.S. grain due to accelerated feed demand, a strong currency, and less product being available for import from Brazil.
• China will remain an active buyer of U.S. grain through at least the 2021/22 marketing year based on steady pork production and higher slaughter rates.
• China’s accelerated demand resulted in record high grain prices that peaked in May and have since been extremely volatile.
• CoBank sees this volatility continuing as China is now buying grain more opportunistically, i.e., on significant price weakness.
• The current grain run has entered a new phase. An elevated period of price volatility coupled with a continued inverted forward curve means that elevators and merchandisers will require capital discipline and excess liquidity.

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