China Record Corn Crop Still Failing to Meet Demand for Feed: Commodities
According to Bloomberg, China has reached its seventh record corn crop in eight years. That still will not be enough to meet demand, driving a fivefold gain in imports as prices head for the highest ever annual average.
Even though this year’s corn production in China is 6.7% more than last year, China will need to import 5 times more corn than predicted. The demand for corn in China is higher than the quantity being supplied.
Corn futures on the Chicago Board of Trade have gained 3.9 % to $6.535 a bushel this year and averaged $6.90, heading for the highest-ever annual figure.
This is an example of what happens when demand is greater than the quantity supplied. Excess demand is the amount by which the quantity demanded exceeds the quantity supplied. This excess demand has placed the corn market out of equilibrium. The result is a record high price for corn. Because of the excess demand, China is also willing to import corn from the U.S. at a much higher price, in order to meet the demand.
According to the article, the lower price of wheat should help keep the cost of corn down a bit. As the price of corn increases, farmers will switch to cheaper supplies for feed. Wheat is a substitute for corn. As the price of corn increases the demand for wheat will increase. The increase in demand for wheat will slightly reduce the demand for corn helping to keep its price from going through the roof.