Customs data released last week reveals that China's insatiable demand for grain continued unabated in October 2020. This was led primarily by demand from the country's rapidly rebounding pork sector, which was decimated by African swine fever in late 2018 and through 2019.
China imported a staggering 1.14 million tonnes of corn in the first month of the fourth quarter in 2020, which was the second-highest level on record.
This was a dramatic increase from next to nothing in October 2019, and was the third consecutive month above the one million tonne mark. It pushes the country's total corn imports for 2020 to an impressive 7.82 million tonnes, which is almost double the previous year - and there are still two months to go.
It also takes China's corn imports for the year-to-date past the official tariff rate quota (TRQ) of 7.2 million tonnes for the first time. That quota was one of the requirements under the Phase 1 trade deal with the United States.
The global corn market is searching for a price that rations demand, particularly in the second and third quarters of 2021. For the rest of 2020, and the first quarter of 2021, the US is the place to shop. But the South American drought - and resultant corn crop issues - are certainly a genuine and growing concern for the corn balance sheet.
And now there is talk in the market that the Chinese demand is more than a short-term supply issue, and - rather - is a longer-term structural change in domestic consumption.
Some analysts are forecasting Chinese imports of US corn will hit the top end of market expectations next year and exceed 50 million tonnes by 2023. Only time will tell. But while the pig herd is rebuilding there, and domestic reserves remain tight, the demand is likely to continue.
Imports of soybeans into the Middle Kingdom for October 2020 totalled 8.69 million tonnes, which was up a massive 41 per cent on the same period last year. Imports from the US were 3.4 million tonnes - almost triple the 1.147 million tonnes from 2019 and up from 1.17 million tonnes in September 2020.
Chinese Customs also cleared 4.233 million tonnes of Brazilian soybeans in October 2020, which was a 11.6 per cent increase from 3.793 million tonnes in the corresponding period in 2019.
But that figure was down from 7.25 million tonnes in September 2020, as the soybean export season in Brazil winds-down and the US starts to dominate fourth-quarter trade.
The world is not rationing global soybean demand on a large scale just yet, in particular from China. And, like corn, the ultimate fear is a crop failure in South America. The possibility of this is increasing with every day of scorching weather and no beneficial rainfall.
There was vague talk during the week that some Chinese soybean importers and processors are looking to wash out of US cargoes booked for December 202 and January 2021 shipment.
It was apparently spurred by the recent Chicago futures rally, which collapsed Chinese crush margins. That will be a fascinating discussion, especially in light of the US trade deal commitments and Beijing's desire to 'keep the peace' throughout the American presidential transition.
China imported 630,000 tonnes of wheat in October 2020, which was up 126.9 per cent from the year before. It has now imported 6.69 million tonnes of wheat in 2020 against a TRQ of 9.36 million tonnes.
With two months of the calendar year left to report, it is possible - but highly unlikely - that China will breach that mark for the first time by year's end. Beijing sold 708,000 tonnes of wheat from its strategic reserves in last week of November 2020 auction. That was less than 18 per cent of the 4 million tonnes offered.
Total sales are now at 13.5 million tonnes since the program started in June 2020. Prices were slightly higher than the previous week, but the clearance rate has fallen from more than 70 per cent in October and suggests Chinese consumers are gaining comfort with the domestic grain supply outlook.
October 2020 barley imports came in at 5.98 million tonnes, which was a jump of 13.4 per cent on the October 2019 figure. Much of this barley came from France, which is posing challenges for European Union feed manufacturers. And as long as the Chinese tariff remains in place on Australian barley, it is highly likely that the Chinese consumers will continue to turn to France, especially, to meet their malting barley requirements.
French barley yields disappointed last harvest, and its farmers have reportedly reacted by reducing the planted area in the recent seeding campaign.
They evidently didn't read the tea leaves very well, as ongoing Chinese demand could be a game-changer for the wheat-barley price relationship in the EU. This would have significant consequences for stockfeed producers and, ultimately, for planting decisions by farmers right across Europe in coming years.
The recovery of China's pig herd has been a fundamental driver of the country's feed grain demand in 2020. According to the Chinese Ministry of Agriculture, the nation's pig herd grew by an impressive 26.9 per cent in October 2020.
But the resurgence in pork output is likely to take much longer, as the quality of the nation's herd is poor and a higher than usual proportion of offspring is going back into the breeding program. This was certainly noted in the October 2020 Customs data, with pork imports jumping 80.4 per cent from 2019 to 330,000 tonnes.
In the January to October 2020 period, China imported 3.62 million tonnes of pork products - a 126.2 per cent leap from the same period in 2019. The scramble for protein also pushed beef imports up 12.2 per cent from a year ago to 170,000 tonnes in October 2020. That took 2020 beef shipments to 1.74 million tonnes.
There seems to be little doubt that the short-term demand from China for grain production from almost all corners of the globe will continue in the foreseeable future, and will dominate grain market dynamics well into 2021.
How that plays out in the long-term is the key question. But there appears to be a growing bias toward more, as opposed to less. Australia's participation in that fundamental change relies heavily on the cooling of tensions and a diplomatic re-engagement from both parties to better recognize the differences - and ultimately resolve the growing trade impasse.