Epidsode 16: China's buying U.S. corn

A recent 1.76 million ton purchase of U.S. corn by Chinese buyers marks the largest export in three decades. But what effect did it have on the market – and the staggering carryout?

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Rodney: 1.76 million tons of corn sold to China. Largest U.S. corn purchase of any buyer in the last three decades.

Gabe: In any circumstance, that's an anomalous purchase size.

Rodney: Yeah.

Gabe: Right. So I think this is some catch up by China in with the agreements that they've made with the U.S. today around the tariff stuff. I will tell you, that came out... Was that yesterday or the day before that that went out?

Rodney: I think it was two days ago. Yeah.

Gabe: Okay. So they've also continued to buy, so talking to the usual suspects on the back end of things, every morning now China's coming in and looking at buying multiple loads, either China or proxies for them. So I'm not sure exactly what will happen, but obviously it's nice to see. Glad I have some of that corn go somewhere that we've got stored up. It's also interesting because China not normally a huge buyer of U.S. corn.

Rodney: Right.

Gabe: But looking at the last five, 10 years, corn is like a rounding error to them in terms of what we sell right to China. So that's really interesting. And look, one large transaction, it doesn't solve everything, but it certainly, it'll be interesting to see what happens now. Are we going to continue to see additional corn purchases? Is there something going on where they're short on feed for some reason? And they look at corn as the answer to that or what?

Rodney: Yeah. Did you happen to see the market reaction to it? To the world's largest single corner purchase in three decades.

Gabe: Pretty sure the market was still down.

Rodney: Nothing.

Gabe: Yeah.

Rodney: Like nothing, right? The highs were put in last week. What I'm most interested in in news articles like this, which is good. I am excited about this news article or whatever, this news. We talked a little bit earlier, and I don't think we'll get into conversation right now about context, right?

Gabe: Mm-hmm.

Rodney: So do you know what 1.76 million metric tons is?

Gabe: Not off the top of my head.

Rodney: Yeah. So I had to do the math. It's 70 million bushels.

Gabe: Okay.

Rodney: Right, so it was a 70 million bushel corn purchase.

Gabe: Okay.

Rodney: Which that sounds like a lot, right? I'm always annoyed by the fact that we announced these world trade numbers in metric tones.

Gabe: How American of you, Rodney. I'd expect you be more...

Rodney: In my defense, I don't care. We can choose metric tons, but let's talk metric tons here. Let's just have one thing. Or when I've talked to originators, and I continued at Indigo, it's like, "Hey, when you're talking to a farmer about a price, you say, "They're 350, that's 10 under." Right?

Gabe: Mm-hmm.

Rodney: So you know that those are both the same thing. That 350 is 10 under in this. You have to say both, otherwise there's no... Nobody knows what that is. Go poll, we should go pull the top 100 ag guys and say, "Hey, what's 1.76 million tons mean for a sale?" I don't think people know.

Gabe: I think the commercials know.

Rodney: Yeah.

Gabe: And when I talked to the Brazilians, I think they feel the opposite. Right? Because I'm always talking to them about bushels here. And every time they're stopping and going, "How many metric tons is that?" That's helpful. 70 million bushels. It's interesting because obviously that's a lot of corn, but also not.

Rodney: That's the thing. So this one sale on its own, which to your point, there's more of them, 70 million out of, I think what we're using like a 2.5 billion bushel carry out today. We knew we were going to make some sales, or at least that's been the promises, right? Is that they're going to purchase some commodity. So most of this has already figured into that 2.5 billion, which carry out. Even if this is a total shocker on top of everything, good.

Gabe: We still have about a 2.5 billion bushel.

Rodney: Roughly, right.

Gabe: Yeah.

Rodney: Yeah, I'm always quick to remind the farmer, I love getting excited. I'm an excitable guy. One big sale to China does not scream $4 corn.

Gabe: No. Well, and 10 big sales to China don't scream $4 dollar corn either.

Rodney: Yeah, right. No, they certainly don't. Yeah, I haven't been following exports. I think I haven't been following exports. Everybody's just kind of been sitting here waiting for news on China purchasing. So just the fact that China finally came in and made some purchases, which they've already promised to do, is definitely the headlines of what's going on in the export markets today.

Gabe: Yeah. China's always the biggest story there, period. And at least I will say, and whether or not you feel like 70 million's a lot, it's good to see movement, which has been pretty quiet.

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