Corn, soybean area to clash on structural demand boom, tight stocks
A scramble for corn and soybean planting area is likely to dominate in the years ahead, as a surge in global and Chinese demand depletes stock levels and drives a clash between the two agricultural staples to feed the fresh demand boom, Bunge’s former CEO Soren Shroder said during an interview for the Global Grains Geneva conference.
After eight stable years of global surpluses and limited market volatility, the global agriculture marketplace “is back in a powerful way” and is set for firm prices on tight stocks caused by a structural shift in demand from China, the agri-food executive and former CEO said.
“Corn and soybeans are set up for several years of a very dynamic tug of war between soybean acreage and corn acreage. It will be more than one growing season to get back to a surplus,” Schroder said during the online interview.
Strong global demand “all-around”, not only driven by China, has combined with marginal reductions in output levels to cause world stock levels to shrink.
“The combination of all of this has put us in this very tense supply and demand carry-out situation in corn and soybeans and most oilseeds,” he added.
Schroder stressed how quickly China’s economy has been able to rebound from the Covid-19 pandemic and the success in rebuilding its hog herd following the African swine fever epidemic, which started in 2018.
That dynamic has boosted Chinese import demand for soybeans and corn, while local stocks of corn in China are expected to be less than had been originally reported.
“The big mystery of the Chinese corn stocks is finally being revealed. Did all those stocks really exist ever, or not? Fact is, it certainly doesn’t feel like it,” Schroder said, citing domestic corn prices, which have hit some of their highest prices ever.
“Chinese corn demand is structural, it is real, is not just a function of the US Phase One trade agreement, it just happens to coincide,” he said.
With China’s economy sharply recovering and its livestock sector rapidly rebounding, China is expected to import around 25-35 million mt of corn on an annual basis, as long as surging price levels do not bring demand rationing.
“That means we have to tap into another 3-5 million hectares of land somewhere in the world, on top of the ongoing 4-5 million ha that the world needs outside of China to fill the ever-growing demand,” Schroder said.
This big shift is setting the agricultural and food space up for several years of “really interesting times” in which market players “can enjoy a bit of a better margin than what was the case in the last five years.”