China Keeps Scooping Up U.S. Corn, Squeezing Global Supplies

(Bloomberg) -- A drought in Brazil is changing up trade flows, and sending China on a U.S. grain-buying binge that’s causing global prices to surge.

Brazil is typically the top market for corn this time of year, but planting delays and drought hurt the current crop, known as safrinha. As a result, China has been regularly scooping up American corn over the past two weeks, people familiar with the matter said.

The purchases by China are squeezing global supplies and have already sent prices to the highest in eight years. That’s boosting the cost of feeding chickens, pigs and cows and stoking concerns about food inflation.

American exporters sold 680,000 metric tons of corn to China for delivery in the marketing year starting starting Sept. 1, the U.S. Department of Agriculture said Tuesday. That’s on the heels of hefty purchases Monday and last week. Many of the sales are for the U.S. crop that’s currently being planted.

China hasn’t historically been a major importer of corn, but now its hog herds are recovering faster than expected from a deadly swine fever. Professional farms are replacing backyard operations, boosting demand for feed grains as smallholders tended to feed their pigs table scraps instead of corn and soy meal.

Traders will be watching the U.S.’s monthly report on global supply and demand on Wednesday to see how much feed demand is shifted to wheat, due to the skyrocketing corn prices, Arlan Suderman, chief commodities economist at StoneX, said in a note.

The U.S. is expected to cut its outlook for Brazilian corn stockpiles to 103 million metric tons, down from 109 million, when it releases its latest world crop outlook on Wednesday, according to a Bloomberg survey estimate.

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