Is Chinese grain and oilseed import demand set to wane?
CRM Agri’s Global Agricultural Economic Outlook (GAEO) examines the broader market and economic trends that influence agricultural commodity markets and what these key indicators mean for prices.
Despite the US Department of Agriculture (USDA) reporting that Chinese imports of major feed grains hit a fresh record high of 37.8 million tons of corn, sorghum, and barley from October 2023 to May 2024, markets are pricing in a falling pig herd and weak economic recovery as potential drags on future demand.
“This view largely holds true,” say the analysts at CRM Agri. “But it may be overstating China’s economic weakness as import demand remained healthy in Q2. Nevertheless, the first estimate of China’s Q2 GDP growth did come in below expectations.”
Robust global economy
Global economic growth remains strong, albeit softening slightly in June relative to May’s robust performance, noted the CRM Agri’s outlook.
“There has been little change to our view of the macroeconomic climate impacting agricultural markets over the past month.”
Global crude oil markets continue to support with Brent and WTI nearby futures prices up 1.5% and 2.8% month-on-month, respectively, according to the analysts.
Additionally, they note that markets have held their view on the future direction of US interest rates since last month, confident that the Federal Reserve will be able to cut rates in its September meeting.
US dollar weakness
However, along with the potential dent in Chinese demand, the report highlights another notable development over the past month: US dollar weakness.
“Although the dollar has shown signs of weakness earlier in the year, it has quickly recovered to its elevated levels, mainly due to analysts revising their interest rate forecasts. If the Federal Reserve doesn't take markets by surprise at the end of the month, we could finally see a sustained pullback in the US dollar, which should attract more funds into commodity markets, supporting prices.”
