The pace of Chinese purchases of U.S. agricultural commodities has picked up in recent weeks. Ben Kasch, an account executive with Bower Trading in Lafayette, Indiana, says there may be more to it than just trying to meet their Phase One commitments.
“That’s the question; is it politically driven from the Phase One or is it fundamental because they’re having production issues and maybe a food crisis on their hands too? They’ve had some weather issues that we haven’t really talked about until they started buying here. They had a dry region in the North China plain that’s a major growing region. China’s a huge country, so they grow all kinds of crops across many, many acres. They’re the second-largest wheat grower and the second-largest corn grower.”
Flooding is affecting a good chunk of China’s main crop-growing areas.
“They are a major producer, but they aren’t self-sufficient in supplying food. So, they had some weather issues, most recently flooding issues in the Yangtze River region, which is a rice and wheat area, causing some flooding there because of 10-19 inches of rain in that area, which is a pretty big deal. They also had the Army Rootworm show up a little early as well in June, which is usually a fall issue, so that’s causing some issues. I think the end-users there are worried about this year’s production.”
Many analysts believe China won’t reach their Phase One commitments. However, Kasch isn’t completely writing off the possibility.
“Anything’s possible, especially with the dollar down now…I think if they wanted to, China could definitely make a push at it. We have plenty of corn to get rid of; not a bumper crop but a large crop, probably over 15 billion bushels. We have enough corn to move, so it would be great if they’d get in here and start buying.”
Also, production problems have forced China to draw down the size of their grain reserves and they’ll need to rebuild that stock.