China’s fading hunger for grain spells trouble for world farmers

HONG KONG - 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 United States 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 ageing 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 Ms 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 soya meal in animal feed.

Shrinking imports

For the season starting in September, the US has sold only 13,400 tonnes of corn for delivery to China, compared with more than 564,000 tonnes a year earlier, according to US Department of Agriculture data. Over the course of 2023 to 2024, exports were 63 per cent lower. Shipments from Brazil also fell.

Exports of French barley – including malting that is used to make beer – are running almost 50 per cent lower this season from the key Rouen port compared with a year ago. Industry group Intercereales sent a delegation to China seeking clarity from customers on a recent request by the authorities to limit imports.

“We are witnessing a bit of a freeze in business,” said Mr Philippe Heusele, the president of international relations at Intercereales.

Some in China’s agriculture industry are starting to run the numbers on what imports in 2024 to 2025 may look like.

Overseas corn shipments could more than halve to nine million to 11 million tonnes, while wheat imports may decline to around seven million to nine million tonnes – down from 13 million in 2023 to 2024 – according to traders based in China.

Beijing “stated earlier this year their goal of improving incomes for Chinese grain producers and to promote increased efficiency in agriculture, which implies China will have greater scrutiny on imports in the future,” said Mr Tanner Ehmke, lead economist for grains and oilseeds at CoBank. “But there’s also the obvious concern about China’s slowing economy.”

While foreign farmers and traders will likely see profits shrink, the upside for global consumers is that cheaper grain could ease pressure on food inflation that surged after the invasion of Ukraine. The other unknown heading into 2025 is the outcome of the US presidential election in November, which could upend trade flows should the winner take a tough stance on China.

A final question mark is the weather, which could yet hit plans to reduce overseas purchases. China was forced to feed a large portion of its wheat to animals in 2023 after rain damage, boosting imports.

China has been the biggest buyer of Australian wheat over the past couple of years. It is now yet another producer where some farmers are already looking elsewhere.

Farmer Andrew Weidemann usually ships around a fifth of his grain to China. He is expecting that volume to halve. “Anything that happens in China is going to have a huge impact on the markets everywhere else,” said Mr Weidemann, who operates a farm spanning 4,000 ha in central Victoria in the south-east of Australia. BLOOMBERG