China’s strong grain demand signals a structural change in domestic consumption levels that may turn out to be a blessing for the dry bulk market. The demand has materially improved during the past few years and consequently the purchases, especially in corn, are no longer anomalous, but are now habitual, according to Arrow research. The record purchases from the world’s second-biggest economy has also driven a fierce rally in grain prices, encouraging production growth that is set to continue. “These developments will provide a solid backstop to freight rates for grain carriers as tonne-mile intensive freight routes see growing volumes,” Arrow said in a report.

If grain prices stay high, then the incentive will remain for producers to export, providing a welcome support to freight rates. “If prompt soybeans end up trading at $15 per bushel again next year, many more cargoes would get lured out of the US into the export market. This could be a significant boost to the panamax segment as fleet growth is lower than potential grain export demand growth.”

Soyabean imports into China nearly doubled in March to 7.77 MMT, according to data from the General Administration of Customs. The US department of Agriculture forecasts China to import around 26 MMT of corn from its international suppliers during the year that begins in September, out of which 9.5 MMT have already been sourced from the US.

Chinese purchases of corn for the next marketing year further indicate the strength of forward grain demand, said Arrow pointing that “these are not stealth purchases to hide their true demand, this is a bold statement that they are in the market for a lot of grain”.

Ocean Analytics noted that the demand for livestock feed continues to surge and provides support for healthy seaborne volumes. Its founder Ulf Bergman said the persistent strength of the container shipping sector is also likely to continue to drive many agricultural commodity consignments to the dry bulk sector, as a result of equipment shortage and high freight rates.

China’s big purchases of corn come as the country rebuilds its hog herd after a devastating wave of African swine fever hit its pig population around two years ago. The country’s hog producing capacity continued to grow in the first quarter of 2021 as the hog herd is seen at 416m head by March 31, up 2.3% on the previous quarter and 29.5% higher as compared with the previous year, the National Bureau of Statistics said April 16. Adding to that, the domestic corn industry is now reflecting a decline in plantings several years ago when Beijing halted its corn stockpiling program and minimum purchase prices.