Extreme Weather Could Push Corn Harvest to Worst Slump in Decades

(Bloomberg) -- China’s corn harvest could be about to record its worst slump since the turn of the century, although that still might not be enough to lift prices in such a moribund market.

Extreme weather, from heat waves to floods, has ravaged production this year in the world’s largest consumer of the grain. But stockpiles are plentiful, and demand is so sluggish that traders are shrugging off the immediate impact. Still, it means the country could be vulnerable to rising import needs if the government’s efforts to kickstart the economy prove successful.

Last year’s harvest came in at a record 289 million tons, government data show. Output in 2024 may drop by between 5 million and 20 million tons, according to five traders and analysts surveyed by Bloomberg. In the worst case, that means production would fall by about 7%, which would be the biggest drop since 2000, when output plunged 17%.   

China’s harvest won’t wrap up until next month, so the final tally of grain produced is still to be determined. But the early indications are that the market’s balance won’t be overly disturbed by even such a large shortfall.

Local prices have ticked higher since the end of September, but they’re still close to four-year lows. Bumper harvests over the last two years have saturated the market, while China’s slowdown has weakened demand from the livestock sector and food processors. The open question is whether Beijing’s recent barrage of economic stimulus measures will significantly alter conditions.

As it stands, China’s imports are lagging recent years and the government expects them to keep falling. In the current crop year, which began in October, the farm ministry is forecasting overseas purchases at just 13 million tons, a sharp drop from the 19.5 million tons estimated for 2023-2024.

That’s a gloomy prediction for the farmers in the Americas that supply most of those shipments, although it does show progress in China’s push for food security. 

The issue in the near-term will be whether Chinese supplies are sufficient to cope with Beijing’s efforts to stoke demand in the wider economy. Beyond that, an increasingly hazardous climate is likely to throw up more challenges to future harvests, which will keep the pressure on the government to buttress supply.

On the Wire

Iron ore tumbled to a three-week low, a sign that investors doubt whether China’s latest moves to shore up the property market will do enough to boost construction activity and steel demand.

China’s economy likely grew at its weakest pace in six quarters, prompting Beijing to roll out a swath of stimulus measures in late September to draw a line under the slowdown. 

BHP Group Ltd. said iron ore output in its first quarter rose 2% from the year-before, as moves by major miners to ramp up production raise the specter of over-supply.

BYD is winning the global race to make cheaper electric cars.

China’s 200 million-strong army of retail investors was supposed to help the market turn a corner. Instead, it has become a source of weakness.

This Week’s Diary

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