China is preparing to buy more than 30 million tonnes of crops for state stockpiles to help protect itself from supply chain disruptions caused by the coronavirus pandemic and make good on pledges to buy more US crops, according to sources. China plans to add about 1 million tonnes of cotton, 10 million tonnes of soybeans, 20 million tonnes of corn to its state reserves, it is learnt.
The bulk of the crops would be imports, and mainly from the United States, as China works to fulfill its commitment under the Phase 1 trade deal signed in January. “The main message from Beijing is to secure people’s livelihoods. It is a good time to build up reserves, especially when prices of the goods are at quite low levels,” one of the sources said.
Beijing also plans to add 1 million tonnes of sugar and 2 million tonnes of soybean oil to the reserves, the sources said. It was not clear where that would come from.
The timing of the purchases could be favourable for Beijing, as the price of Chinese soybean and corn futures are roughly double those in the United States, where large inventory overhangs and muted demand during the novel coronavirus pandemic have pressured crop values. One of the sources said it was unclear when the buying would take place. The timing would depend on how the market evolves. “This is a triple win. Stockpiles can be released to contain price hikes when needed. It helps Beijing fulfill the Sino-US trade deal. And prices are good,” one of the sources said. Discounting shipping costs, the total value of the corn and soybeans supplies from the US would be roughly US$ 6.25 billion, Refinitiv data shows. China plans to buy over 30 million tonnes of crops for stockpiles. China agreed to step up its purchases of US agricultural gsoods, including US$ 12.5 billion above the corresponding 2017 baseline of US$ 24 billion in 2020 and US$ 19.5 billion above the baseline in 2021, as part of a Phase 1 trade pact that Washington & Beijing signed in January.
Chinese buyers have bought US beans, corn and wheat this year after price falls made them good value. China’s farm imports from the United States totalled US$ 5.05 billion in the first quarter of 2020.