Analysis: Corn Market Still Doesn't Seem Impressed with China's Buys

Corn Market Check 071620

Corn traded in the green during Thursday’s trading session, but not by much. Analysts say it’s almost surprising as China has made some of the largest purchases of U.S. corn in history.

“It’s kind of a bearish indicator when good news fails to make the market move higher,” says Alan Brugler, president of Brugler Marketing and Management LLC.

This occurs as USDA’s weekly export sales update shows the U.S. sold 981,100 million metric tons of old-crop corn and 655,400 million metric tons of new-crop corn the week which ended July 9.  China was the lead buyer for both marketing years.

Pro Farmer reporting China’s bookings for 2020-21 would already be the second-largest annual volume exported behind 2011-2012’s 5.15 million metric tons.

“The biggest problem here isn’t that we think Chinese buying is bad, it’s just that we don’t think it’s outstripping the other demand losses and, or the production increases,” says Brugler.

Pro Farmer says China’s aggressive purchases and the results of its weekly reserve auctions remind that supplies are tight. The country sold all of the 4.026 MMT of corn put up for auction this week at an average selling price of 1,950 yuan, the highest price in eight weeks of the auctions.

USDA confirmed lower corn acreage but Brugler believes demand is the other part of the equation.

“The EIA Ethanol report on Wednesday basically said the stocks are still pretty snug here for ethanol. It’s more of a worry than it is an actual loss of demand at this point,” says Brugler. “[It’s] something certainly we have to keep an eye on.”

Meanwhile, one of the biggest U.S. ethanol producers is suing a global grain trader. Green Plains is accusing Archer Daniels Midland of manipulating the price of biofuel to profit from its positions. The lawsuit also claims senior ADM officials knew about it. The case was filed in U.S. District Court in Nebraska. The lawsuit is seeking unspecified damaged.