China’s corn shortage could boost barley exports

Reports that the country is running out of corn likely means it will have to look at other sources of livestock feed

A reported shortage of corn in China is already resulting in strong Canadian feed barley exports to that country, say analysts.

Arlan Suderman, chief commodities economist with StoneX, has read reports that China’s corn deficit will amount to between 25 and 50 million tonnes in 2020-21.

StoneX is pegging the shortfall at 30 million tonnes.

That means China will likely need to import more, but it won’t likely want to bring in 30 million tonnes because that could cause panic in the country, said Suderman.

China’s tariff rate quota for corn is 7.2 million tonnes. He thinks that might be increased to around 12 million tonnes.

That still leaves a big corn deficit that will likely be filled by competing feed ingredients such as wheat and barley, he told participants attending a recent webinar.

Corn prices have been rising in China and that has already led to substitution.

Suderman’s colleagues in China showed him recent survey results suggesting that 18.7 percent of the country’s corn-based hog rations have already been converted to wheat and barley.

That should result in higher barley exports to China. China has an abundance of low quality wheat stocks that it can use in feed rations, so there won’t be any increased wheat demand.

Canada is already experiencing increased barley shipments early in the new crop year. Exports are 409,600 tonnes through week eight, up from 157,800 tonnes the same time last year and well above the 10-year average.

There is no recent breakdown by country but China was the top buyer by a landslide during the first month of the new crop year.

Another thing working in Canada’s favour is China’s trade war with Australia that has resulted in tariffs of 80.5 percent on Australian barley.

MarketsFarm analyst Bruce Burnett expects increased Chinese demand in 2020-21 for a wide variety of Canadian crops, including barley and peas.

“That will make our barley S&D a lot tighter and it will increase prices,” he said.

He does not anticipate that increased feed barley sales to China will restrict the supply available to Canada’s cattle feeders.

“We’re not going to short ourselves on barley. Probably some other customers who use feed barley aren’t going to be using Canadian feed barley this year,” said Burnett.

Suderman said Canadian barley exporters should enjoy the uptick in sales to China but he cautioned them against making long-term plans based on the anticipated new wave of business.

China was a huge feed market for American sorghum growers until it implemented a 25 percent tariff on the commodity in June 2018. Exports recently rebounded due to the Phase 1 agreement between China and the United States, but it has been a turbulent couple of years for sorghum growers.

“China can switch rather quickly as we have learned very painfully in the past,” he said.

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