Corn and Soybean Prices Hit Record Highs

on May 29, 2012

The Financial Times recent cited export figures by the United States Department of Agriculture that are indicative of China’s increased appetite for cereals. US agricultural officials last month announced the closing of an export deal for 1.56 million tonnes of US corn — the largest one-day sale since 1991. And while the end destinations for the orders were not specified, experts speculate that the buyer for the bulk of the orders is China.

An analyst at Rabobank Group, a full-range financial services provider based in the Netherlands, told the Financial Times: “Our Chinese research supports the view that corn feed demand is increasing despite wholesale pork prices’ declining 14 percent since the start of February.”
The Financial Times noted that while China remains the world’s leading soybean importer, it is increasingly buying up corn for animal feed. Both soybeans and corn are commodities widely sought because of their high protein content, which makes them excellent feed for cows, pigs, sheep and poultry.

Because of increased demand for these commodities, the Financial Times said that for the first time in four years May prices for soyabean futures at the Chicago Board of Trade reached over $15 per bushel. At the same time, May corn prices were up 6 percent on the week, reaching $6.50 a bushel.
The London-based International Grains Council (IGC) last month estimated that imports of corn in China may rise by 50 percent, reaching around six million metric tonnes on July 1 when the next IGC marketing year begins.

!m[](/uploads/story/6/thumbs/corn2_inline.png) For the 2011-2012 IGC marketing year, the Council’s forecast for China’s corn imports was four million tonnes.
IGC claimed that increased domestic demand, high local prices and high transportation costs from northern growing areas to the south are likely to drive China’s corn imports up for a fourth consecutive year. Imports from the US, which have proven particularly cost-effective, are likely to see a boost, the IGC said.

According to the Financial Times, some analysts are skeptical that China’s increased demand for cereals would be sustained in the long run, because of the country’s limited food consumption. The newspaper cited Barclays Capital, which estimated that the average per capita intake of China was 2,970 calories a day – a volume not much different than that of Asia’s developed countries. The bank further asserted that this estimate is an indicator that “growth in food demand is already maturing.”

“The only circumstances under which China is likely to experience further strong growth in its per capita calorie consumption levels is if the population adopts a western-type diet similar to that of the US,” Barclays added.
As a comparison, Barclays said that in the US the average daily calorie intake is 3,770, which is 26 percent higher than that in China. Protein consumption in America is also higher by about one third.

By Deyana Ivanova