China is still buying a lot of corn, but are they hungry?

China’s grain output hit record highs in 2011, and senior officials vow that the country will continue its pace of grain imports at appropriate levels to meet its rapidly expanding hunger for foreign produce.


In a press conference, Chen Xiwen, director of the Office of Central Rural Work Leading Group, said China still imports corn due to the need to “balance” regional demands.

“The moderate corn imports do not mean that there is a supply shortage in the domestic market,” he repeated.

Chen wants to say there is no supply shortage of processed corn products like starch and ethanol and animal products fed on corn. On that front, China’s corn exports still exceeded imports.


As far as soybeans go, the Office of Central Rural Work Leading Group is citing climate, technology, transport and seed varieties as reason for the increased level of imports in recent years. 

The soybean imports helped save agriculture land for higher-value crops.

China food security remains intact with the country’s grain output accounting for 22% of world’s total output last year, while during the same period China’s population made up 19% of the world’s total. 

Better utilization of land and farming technology has help post some impressive growth numbers.  China’s grain output increased around 4.5% year-on-year to a record high of 571.21 million tons for 2011, resulting in the eighth consecutive year of growth in grain output

Traders can gain exposure to the grain futures through ETF, but remember these ETF are sometime thinly traded and in the some cases like SOYB fairly new as well.

For corn, look at Teucrium Corn Fund (CORN, quote), an ETF seeks to replicate, net of expenses, the daily changes in percentage terms of a weighted average of the closing settlement prices for three futures contracts for corn that are traded on the CBOT.

These contracts are, specifically, the second-to-expire CBOT corn futures contract (35% weighting), the third-to-expire CBOT corn futures contract (30%) and the CBOT corn futures contract expiring in the December following the expiration month of the third-to-expire contract (35%).

The fund may also invest in corn-based swap agreements, short-term obligations of the US government and/or cash equivalents.

For soybeans traders can look at this new ETF — caution here — Teucrium Soybean Fund (SOYB, quote), which seeks to reflect the daily changes in percentage terms of a weighted average of the closing settlement prices for the three soybean futures contracts.

The fund invests normally in benchmark component futures contracts or in certain circumstances, in other soybean futures contracts traded on the CBOT or on foreign exchanges.

It may also invest in exchange-traded options on soybean futures contracts and in soybean-based swap agreements that are cleared through the CBOT or its affiliated provider of clearing services in furtherance of its investment objective.


Those traders looking to gain broader exposure to agriculture can look at the more widely traded Power Shares Agriculture Fund (DBA, quote), which seeks to track the price and yield performance, before fees and expenses, of the Deutsche Bank Liquid Commodity Index – Optimum Yield Agriculture Excess Return.

The index is a rules-based index composed of futures contracts on some of the most liquid and widely traded agricultural commodities: corn, wheat, soybeans and sugar. The index is intended to reflect the performance of the agricultural sector.

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