Is FBN watching the Yangtze river flooding?
Is this a black swan that China will need grain to feed people and livestock or a bearish demand destruction event? ******************......
It is an event worth watching. Flooding with upwards of 20 inches of rain has happened in some key corn/soy growing regions in China. China's Dalian corn futures price hit a 5-year high to start the week.
The strength is in part a reflection of the production issues, but the long-term structural trend is China produces less corn than it uses every year so stocks continue to fall. Add to that a Chinese hog herd that is quickly rebuilding and you have a recipe for higher internal Chinese prices.
China has already purchased 3.8 MMT of U.S. corn for 2020, according to USDA. And with Ukraine facing a tough growing season, this could open the door for more US deals to China and Europe in the coming months
Let's hope the flooding can be contained and their hog herd continues to eat corn and soymeal.