Policies, prices and natural disasters affecting the Chinese corn market are creating a shortage that could soon result in an increased demand for US corn. According to the South China Morning Post, China will face a grain shortage of nearly 130 million metric tons (MMT) by the end of 2025, as President Xi Jinping calls to cut food waste in the country.
As a result of grain stockpiles, the Chinese government quit paying farmers above-market prices for corn four years ago. Ever since this program abandonment, the country has produced less corn than it consumes, and state-owned stockpiles that held the supply strong are now nearly gone.
In addition, an aging rural workforce is expected to slow production as estimates show nearly 25% of China’s rural population will be over 60 years old by 2025. Thus, the Chinese domestic supply of corn, rice and wheat is expected to fall short of demand by 25 MMT by the end of 2025, according to the Rural Development Institute at the Chinese Academy of Social Sciences.
China has also faced floods and infestations this year. For the first time, fall armyworms have been found in the Liaoning province, located in the northeastern region of China’s corn belt. As of Aug. 13, armyworms had hit roughly 1.07 million hectares of farmland across 24 provinces in China. This has driven Chinese corn prices to a five-year high. Locusts are another threat to China’s crops as they have moved their way across Asia. On July 31, the Ministry of Agriculture and Rural Affairs ordered the spraying of pesticides to combat locusts after the insects had damaged roughly 90 square kilometers of cropland in the Yunan Province within the month.
Floods started in early June and are continuing throughout the basins of the Yangtze, Huai, and Yellow rivers—all important grain producing regions in China. A total of 27 Chinese provinces have been affected by the flooding this year, as the nation has seen over 144.4 billion Chinese yuan in damages. The floods have also caused a spike in the number of new cases of African Swine Fever, which resulted in the loss of 180 million pigs (40 percent of the national herd) last year. Thus, the price of Chinese pork has jumped 86% from the same period last year.
Many analysts believe that rising corn prices, as a result of dwindling stockpiles and decreased production, are driving the country to experience its first corn shortage in several years. In turn, China could face a corn deficit of up to 30 million tons, which equates to nearly 10% of the total crop. Should this occur, the Chinese demand for US corn and other grain products will likely increase.