Posted on September, 16, 2024 at 10:16 am
Warehouses across China are bulging with grain as a deepening economic crisis takes hold, leaving the world’s farmers to grapple with the prospect of a long-lasting slowdown gripping one of their largest customers.
The strain across global markets is already showing. French barley exports to China have been tumbling and the US has yet to sell a full corn cargo for the new season. Wheat farmers in Australia are likely to be nervous as they prepare to start harvesting their new crop over the coming weeks.
None of this will change soon, and the combination of an aging population and a cooling economy augurs poorly for the future. Traders and farmers will need to start adjusting to a very different demand outlook. Even if food security concerns keep imports robust for years to come, the meteoritic growth seen through the past two decades is likely over.
“People are getting more pessimistic about the economy and demand,” said Ivy Li, a Shanghai-based commodity markets analyst at StoneX. “Importers will be very cautious, buying more slowly and doing more hand-to-mouth purchases. Impact from the collapse of confidence is all around.”
China’s slowdown and the pain in the country’s property market have battered consumer confidence, pushing money-conscious households to cut back on meat and forgo restaurants, curbing the amount of crops needed to feed a massive pig herd or to fry food.
Beijing has already taken steps to try to protect farmers, asking traders to limit overseas purchases of corn, barley and sorghum — an effort to ease oversupply exacerbated by a buying spree earlier in the year, when merchants snapped up cheap overseas cargoes. These eventually flowed to Chinese ports just as consumption softened. The nation has also moved to reduce the use of soymeal in animal feed.
Shrinking Trade
China’s economic boom at the start of the century transformed the nation into a powerhouse consumer of commodities from grain to metals and oil, and led to resource-rich countries ramping up output to meet surging demand. China’s own agriculture industry is huge, but the need to feed 1.4 billion people mean it’s become a behemoth importer of soybeans over the years — and more recently a major wheat buyer.
Source: YAHOO FINANCE