Brazilian Corn Pours into China; "Diversification" increases Dependence

Chinese State media celebrated growing purchases of Brazilian corn as a strategy for breaking the "dominant position" of U.S. corn in China's market. In an October 10 article, "China adjusts corn imports to shift toward Brazil, U.S. loses 'dominant position'," China's strongly nationalist Global Times said, "China is now carrying out corn import diversification to change the excessive reliance on the U.S. as a single supplier."

Citing Refinitiv data, Global Times was thrilled to report that August 2023 imports of U.S. corn were down 83% from a year earlier while corn imports from Brazil went from zero last August to 580,000 metric tons in August 2023. Moreover, Global Times reported that imports of Brazilian corn would rise to 1.22 million metric tons in September while imports of U.S. corn would drop to 70,000 metric tons.

China approved Brazilian corn for import late in 2022. Brazilian customs data show that 1 million tons a month were shipped last December and January. Brazil's new corn shipment campaign revved up again with 900,000 tons in July, 2.4 million tons in August and 3.5 million tons in September--shipments even bigger than those predicted by Global Times. 

Source: Brazil's customs data.

An article in Chinese news media last year implied that China had kept Brazil waiting for nearly a decade before fully consummating the deal. China had signed a protocol for Brazilian corn to enter China in March 2014, but it was never fully implemented because China had a huge glut of corn at the time and many GMO corn varieties grown in Brazil had not been approved. Only a few small test shipments of Brazilian corn reached China until 2022.

A surge of corn imports during 2012 first set off alarm bells in China because nearly all of it was supplied by the United States. Authorities thought that was the beginning of a corn import boom. They jumped into action by approving Ukraine and Brazil as additional corn suppliers. Also in 2012, a $3-billion loan was issued by the China export-import bank to fund agribusiness and infrastructure in Ukraine in 2012 to be repaid with grain shipments...so Ukraine's corn received full approval almost immediately. 

After Ukraine was approved, China suddenly began rejecting nearly every U.S. corn shipment during 2014/15, claiming to have found traces of an unapproved GMO corn variety. (Ukraine supposedly doesn't grow GMO corn.) Ukraine replaced the U.S. as China's sole supplier of corn for most of the next 6 years. Shipments were limited however due to China's worsening glut of corn that became evident in 2014. In 2016 China canceled the corn price support program that created the glut and sold off massive amounts of excess corn reserves during 2017-2020. 

Source: Analysis of China's customs data.

The United States came back into the picture in 2020/21 when China's excess corn reserves were depleted, Chinese corn prices spiked, and the Phase One trade deal committed China to import more U.S. farm products. This is when the U.S. (temporarily) gained the "dominant position" decried by Global Times. 

Then, in 2022, China's "friend without limits" invaded Ukraine, stole corn fields, destroyed warehouses and ports, and mined shipping lanes, severely disrupting Ukraine's corn shipments to China and elsewhere. China needed a new competitor for U.S. corn, so it finally opened its market to Brazil.

And it's probably entirely coincidental that China became very active in approving Brazilian corn and various other farm products for its market during 2022, just before Brazil became one of the first countries to pledge support for China's Qu Dongyu for re-election to a new term as the FAO's Director General in 2023. Two months after winning his new term in July, Qu took a trip to Brazil where he signed multiple agreements including a new research center on tropical crops. This couldn't possibly have been a reward for supporting Qu's candidacy.

While China claims to be diversifying its corn imports, the Brazilian corn pipeline will add to China's growing dependence on Brazil which is already a top supplier of China's imports of soybeans, cotton, beef, pork, and sugar. Brazil now supplies about 25% of China's agricultural imports, more than any other country. The U.S. share was 25% a decade ago but is now down to 16% so far in calendar year 2023. Other leading suppliers Thailand, Australia, and New Zealand supply about 5% each. 

*January-August 2023. Source: China's customs data.