China's Concerns About the Corn Supply (and Potential Shortages)

Beijing remains concerned about corn supplies, especially in the medium to long-term, the South China Morning Post reports, as China is becoming a big-time importer of corn:

"China's net import of corn could exceed 20 million tonnes in three years," said Liu Xiaobo, a Shanghai-based food analyst from Everbright Securities. "Most of the corn imports come from the United States, which is expected to increase its domestic consumption of corn for ethanol production and the same applies for corn-export countries in South America like Brazil.

"So, China can't assume it will always be able to buy enough corn from the international market," he said.

According to data from research institute Cngrain.com, the mainland will need to import one million tonnes of corn in 2010-11, down from 1.5 million tonnes the previous year. Corn consumption is expected to grow from 158.8 million tonnes to 163 million tonnes, while corn production should increase from 155.5 million tonnes to 165.8 million tonnes.

Full article here: Corn Supply Remains a Worry for Beijing

This doesn't leave much supply slack in the system.  When countries swap from net exporter to net importer status, that can be quite bullish for the specific commodity in question.  This has happened in the oil market over the past 15 years, with more and more countries becoming net importers of the goo.

 

Corn, which is traditionally said to rally up to July 4th, has ironically been on a tear since roughly July 4, 2010!

(Source: Barchart.com)

Rising demand coupled with tight supply is the theme of this 12-year old commodity bull market - and with that, let's revisit the words of our commodity investing patriarch, Jim Rogers:

“The average farmer in the United States is 57 years old,” Rogers shared (providing me with yet another “How the heck did he know that offhand?” moment).

“Who’s going to farm the land 10 years from now?  These guys will be 67…if they’re still around.  And nobody is graduating with farming degrees today.”

“There are just not enough farmers in the world.  There are vast stretches of empty land in Japan, believe it or not – with nobody to farm them.”

He thinks this commodity bull market could continue to rock and roll for some time because “little or no supply has come on line yet.”

Source: Live From Singapore, an Exclusive Interview With Jim Rogers

Over much of the past century, the US has been the sole driver of commodity markets.  It now appears we've got company in the front seat.

Investing note: There are a few ETFs that partially track the price of corn, with DBA being the most notable.

 

DBA broke out in 2011.

(Source: StockCharts.com)