An American Farm Bureau Federation (AFBF) Market Intel analysis shows China is buying more U.S. commodities for the upcoming marketing year, starting in September. The analysis includes corn, soybeans, sorghum and cotton.
“So far, soybeans, sorghum and cotton have quite a lot of advanced new crop sales, greater than what they’ve been the last few years. Corn sales, a little bit slower. Even though we are seeing reports of big sales by volume, when you look at those sales as a share of total production that’s expected this year, those sales are still pretty moderate,” Veronica Nigh, AFBF economist, said.
Large new-crop sales kick-start exports for the new marketing year, but don’t necessarily lead to greater total exports. Nigh said current data show China is behind its phase one commitments, which were finalized in January.
“Through the end of June, China was behind on their purchases that they would need to make in order to reach that commitment,” she said. “So, unfortunately, it’s going to come down to the wire, but we’ll still be looking very closely over these next few months to see how the pace is going.”
Nigh noted there are many factors that can influence trade with China.
“There’s a lot of dynamics going on—those that are market driven and those that are politically driven,” she said. “So, one thing we do watch pretty closely are cancelled sales. That would be commitments for purchases that never actually materialized into exports, and then I think it’s also important to remember that we’re only a part of the larger China-U.S. relationship.”
New-crop sales of soybeans, sorghum and cotton are significant and exceed the share of recent years’ projected production. But the U.S. Department of Agriculture’s Foreign Agricultural Service says “strong early season sales do not necessarily lead to greater total exports as numerous variables influence trade dynamics throughout the year. However, large early season sales do give a kickstart to exports in the coming year.”
Click here to read AFBF’s complete Market Intel analysis.