China shook up the U.S. feed grain export market over the last year, purchasing massive quantities of U.S. soybeans, sorghum and corn. A new report CoBank's Knowledge Exchange finds the outlook for continued U.S. grain exports to China remains strong, primarily due to its projected growth in pork production.
However, the current U.S. grain run has entered a new phase marked by significant price volatility, and China is leveraging that volatility to its advantage.
A CoBank researcher says, "The increased volatility in grain prices has led China to shift its buying pattern to wait for price weakness before committing to additional purchases, as well as to contract now for the next marketing year."
China's heightened demand resulted in record-high grain prices that peaked in May and have since been extremely volatile. A period of elevated price volatility, coupled with an ongoing inverted futures curve, means that grain elevators and merchandisers will require capital discipline and excess liquidity.