China's Shift From Corn to Wheat Could Hamper Imports

The second-largest economy is making use of its wheat surplus. China is shifting from corn to wheat for its animal feed market, which could hamper corn imports.

Soymeal could also see reduced consumption in this shift, as reported by Reuters. Consequently, it’s not good news for nations like Brazil and the United States — two of the largest producers of corn and soybeans.

Per the Reuters report: “Brazil has produced a record soybean crop this year but shipments to China are currently behind last year’s rate. Meanwhile, China has cancelled more than 800,000 tonnes of U.S. corn orders in recent weeks as buyers await cheaper options later in the year.”

This isn’t welcome news for corn and soybean producers, especially with the anticipation that China’s re-opening could open up the floodgates for consumption in these agricultural commodities. This could translate to increased supply amid reduced demand, thereby reducing prices of corn and soybeans — not exactly positive news for bullish traders.

“The biggest impact is on corn, the price can’t rebound. Of course that will impact imports,” said Yuan Song, chief analyst at Juxing Agriculture Group.

China is the world’s top producer of wheat, and it also imported a record number of wheat from other nations, increasing its supply of the commodity. A shift from corn and soybeans to wheat will help alleviate this oversupply.

3 Options to Trade Global Forces in Ag Commodities

Global changes in the way nations consume agricultural commodities can have a profound effect on prices. As such, traders can use ag commodity-focused funds to capture the price fluctuations. In the aforementioned case of China, there are three options traders can use:

  1. The Teucrium Wheat Fund (WEAT) provides investors an easy way to gain exposure to the price of wheat futures in a brokerage account.
  2. The Teucrium Corn Fund (CORN) tracks three futures contracts for corn that are traded on the Chicago Board of Trade, including 35% second to expire contracts, 30% third to expire contracts, and 35% December following the third to expire. The various contract exposures help the fund limit the negative effects of rolling contracts, especially during a market in contango.
  3. The Teucrium Soybean Fund (SOYB) can essentially provide similar exposure to what investors could obtain by trading in soybean futures contracts themselves. This offers short-term traders or longer-term buy-and-hold investors easy ingress when it comes to soybean price exposure. SOYB provides this level of exposure in a dynamic investment product, as a tactical trading tool or hedge against inflation.

For more news, information, and analysis, visit the Commodities Channel.