A typhoon and tropical storm have dumped enormous amounts of rain on northeastern China, creating damage that recalls crop-wrecking storms in 2020 that helped force the country to increase corn imports.
China is assessing the damage caused in late July by Typhoon Doksuri and the heavy rain and flooding that followed.
Another typhoon, called Khanun, hit the Korean peninsula Aug. 10 and was expected to move north, becoming a tropical storm that could dump more heavy rain into northeastern China already damaged by Doksuri.
Northeastern China is home to most of the country’s corn and soybean production. Rice and spring wheat also grow there.
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News reports from China are mixed. Some say the typhoon damage has the potential to trim grain production by a few million tonnes, but the official government August update kept the forecast unchanged.
In August and September 2020, three typhoons hit the region in rapid succession with strong winds flattening many corn crops at harvest time.
China’s official crop statistics are often viewed with suspicion because the food situation in a country of 1.4 billion people is of strategic importance.
The Beijing government said it helped farmers cope with the drowned crop and total corn production was 260 million tonnes, equal to what was forecasted earlier in the summer.
But that year, China’s domestic corn prices rose, sparking a massive increase in corn imports.
In the previous five years, imports had averaged about 4.2 million tonnes. In 2020-21, they soared to a record 29.5 million tonnes. About 73 percent of that corn came from the United States and the surprise demand, coupled with a domestic U.S. crop that proved much smaller than expected, helped drive Chicago corn futures from about US$3.25 a bushel in August 2020 to a peak of more than $7.50 by May 2021.
Did the typhoons cause a shortage that helped drive up world corn prices? Coincidence is not causation.
Typhoon damage likely played a role in the shortages but other factors had bigger impacts.
A few years previously, Beijing decided that its support for grain production was causing surplus corn production and burdensomely large stocks.
It changed support programs and corn production levelled out.
Between 2005 and 2015, corn production almost doubled, growing from 135 million tonnes to 265 million.
But after the support programs changed, production stagnated for five years, ranging roughly from 263.6 million in 2016 to 260.7 million in 2020.
But in those years, demand grew quickly because the government had encouraged corn processing and ethanol production to use the overproduction and stocks
Also, the African swine fever disaster changed the way pigs were fed in China.
The swine herds were culled, but the new operations that replaced the pig production no longer used millions of tonnes of food scraps but turned to corn and soy feed formulations. So corn occupied a much larger percentage of the overall feed demand.
Corn demand that had ranged from 200 million to 219 million tonnes in the five years before 2015 had grown to 285 million tonnes by 2020 and was outstripping production by a significant margin.
Government statistics still showed large state-owned corn stocks but logic indicated that the stocks had to be falling.
In 2020, the rubber hit the road. Shortages appeared and prices rose.
Meanwhile, the trade war between the administration of former U.S. President Donald Trump and the Chinese government was settled with a deal signed in January 2020 under which China agreed to buy an additional US$40 billion in U.S. farm goods in return for the U.S. dropping tariffs on a range of products.
In 2020-21, China imported 21.48 million tonnes of corn from the U.S. valued at $5.35 billion.
In 2021-22 it imported in total 21.88 million tonnes, of which 15.08 million came from the U.S., or 69 percent. Several million tonnes came from Ukraine.
But China is diversifying its sources of imported corn, adding Brazil in 2022.
In 2022-23, China is expected to import 18 million tonnes of which the U.S. will supply close to eight million tonnes. So the U.S. is now supplying less than half of China’s needs.
This year, imports will climb to 23 million tonnes and Brazil, which has harvested a huge crop, will supply a big part of China’s needs.
To summarize, regardless of the impact of the 2020 typhoons, developments in China put it in a situation where corn demand consistently exceeds production capability and so large corn imports are now a continuing feature.
The U.S. initially provided the lion’s share, but now Brazil will be a significant source, as will Ukraine when the war there permits.
The recent typhoons might trim China’s production, forcing it to bump up imports, but large imports were already expected and the tonnage will be distributed, resulting in less impact on U.S. futures markets.
