Brazil has overtaken the United States as the leading shipper of corn to China, just a year after the world’s top importer gave the go-ahead for supplies from the South American country.
Cargoes from Brazil amounted to 8.79 million tons in the 11 months through November, or 40 percent of the overall total of 22.18 million tons, according to customs data. US shipments came in at 6.50 million tons, almost 30 percent of the total, and down by more than half from a year earlier.
Once dependent on the US and Ukraine, China sought to diversify suppliers as purchases surged, a move that coincided with a record crop in Brazil. Chinese imports have exceeded 20 million tons for three straight years as the country looked to replenish stockpiles, while satisfying demand from the livestock feed and processing industries.
“Brazil had a bumper harvest and their corn was cheap,” said Cherry Zhang, an analyst with Shanghai JC Intelligence Co. “The countries also have friendly relations.” Traders booked a large amount of the grain from the country earlier this year and now those cargoes are arriving, she said. Overall corn imports in November were the highest on record in data going to back to 2005.
Beijing signed a deal with Brazil last year to buy the country’s corn, with the first shipment arriving in January. Imports from Brazil in December are expected to total at least 1.5 million tons, and they are likely to stay high in the new year, according to Shanghai JC estimates.
Lower corn prices in Chicago and logistical issues restricting Brazilian exports could start to push traders back to US supplies, traders and analysts said.
Whichever origin is more attractive, suppliers will have to grapple with a weak domestic market. Corn futures on the Dalian Commodity Exchange are down 16 percent in 2023, and at their lowest level in more than three years.
“Pessimism is pervading the market,” China brokerage Holly Futures said in a note. “Farmers face a lot of pressure selling their grain, while downstream traders are reluctant to build stockpiles.”
Even though China has an enormous appetite for the grain, the main consumers—livestock farmers and processors—are struggling to make profit, casting a shadow over the strength of demand going forward.
Critical minerals
Australia wants to compete with China in producing and refining resources vital to the next phase of high-tech manufacturing around the world, according to Minister Madeleine King, backing the country’s bid to build its critical minerals capability.
When asked about the possibility of greater Chinese investment in the sector, Resources Minister King said while Australia was receptive to proposals, the government sought to build up the domestic industry.
“The reason we want to make sure that we hold more critical minerals capabilities here, in refining, in processing, and further down the line, is to compete with China,” King said in a phone interview on Tuesday. “That’s not a bad thing.”
Since coming to power in May 2022, Australia’s center-left Labor government has ramped up investment in minerals including lithium, cobalt and titanium, which are vital for global green energy infrastructure and the defense manufacturing.
King’s remarks come days after Australia expanded its list of resources deemed crucial to its energy transition and national security needs. Australia has some of the world’s largest reserves of the critical resources, sparking interest from nations keen to diversify their supply chains given China’s substantial head start in processing.
In recent months, Australia has boosted cooperation with countries including the US on critical minerals. However as relations between Beijing and Canberra warmed, China has pushed for greater access for its investors, including in the mining sector.
Ambassador Xiao Qian said in October he wanted to see a more hospitable environment for Chinese investors while top diplomat Liu Jianchao warned during a November visit that his country’s firms didn’t see “a clear future” for investment.
About half of the government’s A$4 billion ($2.6 billion) financing facility to build up the critical minerals capacity has already been spent, and there may be a need for further state funding, King said.
The department was looking into strategic critical minerals hubs across Australia to concentrate mining and refining in specific areas, where they could share infrastructure assets, she said.
The minister said the expense of individual companies constructing roads and rail infrastructure to service their operations could dramatically push up the cost of projects. Bloomberg News
Image credits: Dado Galdieri/Bloomberg