Farmers use a threshing machine to thresh harvested corn at a farm on the outskirts of Bangalore, India, Jan. 19, 2021. A girl is pictured playing with corn kernels.
Recent cold and drought extremes in many parts of the world have sparked concerns about short supplies of food and oilseeds. Mainland China, in particular, has been buying large amounts of corn that U.S. farmers will not harvest until this fall in advance because of the very high demand for livestock feed.
According to Bloomberg, people familiar with the situation said China has purchased corn that will not be ready for shipment until the fourth quarter in the U.S., although they declined to be named because the transactions are being made privately. The crop ordered has just now been planted, and traders estimate sales to China will be at least 1 million metric tons.
U.S. exporters have sold more than 20 million metric tons of corn to China this season, a record high, according to the U.S. Department of Agriculture. The agency has not yet released data on next season’s transactions, but some deals may have been made and just not reported.
Demand for corn in China is actually so great that it is already snapping up next season’s crop and is not expected to slow down this year.
We know there’s a huge global demand for feed grains right now, and people are starting to wonder what will happen if there’s a shortage in the Brazilian crop,” Joe Nussmeier, a broker with Frontier Futures in Minneapolis, Minnesota, said in an interview. People are starting to wonder what would happen if there was a shortage of crops in Brazil. Without rain, every day brings their yields down.”
U.S. farmers have slowed planting due to the effects of the record cold snap. The cold snap may also have damaged hard winter wheat that will be harvested in a few months. Because the drought threatens Brazil’s crop production, it has led to a surge in demand for U.S. supplies.
Tight global grain stocks, combined with unfavorable weather, led to a further rally in crop futures prices. Last week, fund managers’ net bullish bets on corn were raised to a 10-year high. The spike in corn futures also led other crops to surge.
In the futures market on Thursday (22nd), traders were still buying crop options in large quantities. According to preliminary data, calls on corn, soybeans, wheat and other crops traded in excess of 363,000, the highest total since January. In corn, implied volatility and the tilt of call options are jumping.
Chicago corn futures rose 4.1% to $6.315 a bushel, the highest price since May 2013. Chicago’s benchmark wheat rose 5.3 percent to $7.105, the highest settlement in nearly seven years.
Soybean oil climbed to its highest price since 2011, reaching the exchange’s ceiling of 2.5 cents per pound, due to growing demand for renewable diesel.
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