Corn Pushes China’s Ag Purchases to Record Levels

In 2021, China purchased a record $35.9 billion worth of ag products from the United States. This was roughly $7 billion — or 25% higher than 2020 levels ($28.8 billion) — and beat the previous record of $29 billion, which occurred in 2013.

The two biggest sources of change between the previous highs and 2021 were massive corn and beef purchases. Of the $7.1 billion increase, corn alone accounted for 55% of the new purchases. Not only was corn the largest driver of increased activity, but China’s corn purchases also increased from $55 million in 2019 to $5.1 billion last year.

There is no clear answer as to why China has been purchasing U.S. corn, but we can begin to shed some light on the mystery when considering production and consumption trends.

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Production, Consumption and Trade

As the population and incomes have increased, so has China’s consumption of corn (Figure 1). Since 1970, China’s production and consumption have remained mostly in lockstep, increasing roughly 4.4% annually over five decades.

Shown in green is the share of global corn imports that China makes. China is no stranger to corn imports and, since 2009, has been consistently importing a modest amount of corn. For instance, in 2011, China’s activity accounted for 5% of global trade and previously peaked at 6% in 1994.

It’s worth noting, however, that those trends have been interrupted in recent years. China’s corn production has been largely flat since 2015. During that same time China’s domestic consumption, along with its corn import activity, grew higher. In 2020, China bought 16% of the globally traded corn, and in 2021, purchases equaled 13% of global activity.

Acreage Slips

When thinking about the reasons for China’s stagnation in corn production, there are only two variables behind the math: acres and yields. China’s corn acres, which trended higher over the last several decades, slumped in recent years. Insight on the acreage expansion and sudden stagnation lead to questions about China’s plans.

First, China’s decades-long trend has been fueled in no small part by increased acreage. This has been especially evident since the early 2000s, as acres increased from 60 million annually to more than 100 million.

Second, while China’s corn acreage has paused at various points in the past, one has to wonder if acreage: will return to the expansion pace observed throughout the 2000s, will continue to expand but at a slower pace, or will remain stagnant? It’s important to keep in mind total acreage in China has been unchanged since 1990, so any increase in corn acreage is a tradeoff with other crops. There are no clear answers at this point, but keep in mind domestic consumption continued to expand in recent years.

Wrapping it Up

The enthusiasm and uncertainty about China’s recent corn purchases has everyone wondering, “How long will it last?”

On the one hand, weather-related supply shocks — such as floods or drought — would likely result in a short-term uptick in corn imports until domestic production recovers. On the other hand, if China’s future corn needs must be met by imports, it would likely result in China being a significant and growing corn buyer for years to come. The implications are far from clear at this point.

Lastly, keep in mind that China has been rocked by several shocks over the last few years. There was the trade war, African Swine Fever and COVID-19. Concerns about sluggish economic growth stemming from recent COVID-19 shutdowns continue today. Taken altogether, it will likely require a few more years of data to untangle how much of China’s corn purchases in 2020 and 2021 were an interruption in the long-term trends or the emergence of a new one.

Widmar and Gloy are the co-founders of Ag Economic Insights (AEI.ag). Founded in 2014, AEI.ag helps improve decision making for producers, lenders, and agribusiness through: the free Weekly Insights blog, the award-winning AEI.ag Presents podcast- featuring Escaping 1980 and Corn Saves America, and the AEI Premium platform, which includes the Ag Forecast Network decision tool. Visit AEI.ag or email Widmar (david@aei.ag) to learn more. Stay curious.