American corn is the backbone of global agricultural trade. As China focuses on reducing its reliance on U.S.-grown fruits and vegetables, a larger share of that corn is now being sent to Europe, Japan and South Korea. With trade tensions still an issue, the future seems to call for a massive shift. At the same time, China is strategically increasing imports of staple crops from South America.
In the past, China has been one of the largest purchasers of American corn, using it mainly for animal feed and bioethanol production. The country is aiming for increased agricultural self-sufficiency and desires to diversify its sources of agricultural imports. To do this, it has dramatically scaled up its purchases from South American growers. This pivot is indicative of the turn China’s agricultural policies have taken. It further rattles the global corn market.
Now that China has pulled back its demand, American corn is being funneled more and more to Europe. And countries in the European Union are significantly increasing their imports of U.S. corn. They’re doing this to meet their agricultural demands, particularly for animal feed. This constant supply of American corn has created a very competitive market, driving down prices at home.
Not only Europe, but Japan and South Korea are quickly emerging as new markets for U.S. corn. These countries understand the importance of U.S. corn to their developing agricultural economies. They are dramatically increasing imports to protect and promote their food security and stabilize their domestic markets. U.S. producers of agriculture are looking to develop an export market beyond their traditional destinations. They’re looking to mitigate the dangers that stem from putting all their chips on a single market.
Chinese demand, which has particularly hit U.S. corn prices hard. Deposited by Central Banking Though as supply chains settle into this new reality, price shocks are relatively normal. Such bullish moves have analysts calling for higher sales out to Europe and Asia to bring some firm price stability, especially in the long term. The short-term effect of China’s turn is certainly acute.
The ongoing tit-for-tat trade retaliation underscores the complicated relationship between global agricultural markets and domestic trade policies. Countries such as China are proactively implementing alternative plans in order to strengthen their food sovereignty. In turn, U.S. farmers and exporters are forced to get creative and find new markets.