Market Matters Blog

"China Set to Export Corn...," Yeah, Right

You never know what you're going to see as far as headlines on any given day. But make that day a tinderbox of trader nerves, waiting for a quarterly USDA report, and volatility in grain markets could quickly spike. Such was the case Friday when a news story was released with the explosive headline, "Exclusive: China Set to Export Corn, Posing New Threat to Battered Global Market -- Sources."

In today's algorithmic trading, headlines, especially bearish ones like this, matter. Watson (my name for high-frequency computerized trade as an entity), doesn't have the nanoseconds to read the entire story, which makes long headlines full of charged words, even more of a concern.

So what about the story. Those familiar with China, and the grain and oilseed markets, know it's nothing more than a game. Will China really export corn? Possibly. Will it "pose a new threat to battered global market?" No. As DTN Analyst Todd Hultman was quick to point out "the article talks about 2 million metric tons of corn, which if true, is nothing. China is expected to import 3 mmt during the current 2016-17 marketing year." He went on to say, "I continue to have big doubts that China's supply problems are a threat to world supplies. This is a domestic issue from a big consumer that is struggling to stay self-sufficient in corn and wheat."

The reaction from social media, Twitter in particular, was along the same line. Most got a good laugh out of the headline, some questioned the quality of these old stocks China is looking to sell. Others pointed out China can't get rid of its out of condition old corn at auction, so why would the world market believe it is going to be able to move it in the export market.

Then there's the matter of China's imposing anti-subsidy duties on U.S. distiller's grain exported to China (for a thorough discussion, see DTN Reporter Todd Neeley's article on the subject on DTN sites). How many believe that China's corn situation is so abundant that it doesn't need DDGs (a corn ethanol byproduct) and can export its own leftovers. If you do, I've got a Great Wall in Asia to sell you.

As for the market, corn was down three cents early Friday. Was it due to the headline? Possibly, given contracts slipped to new daily lows despite a lack of other news. The real question is whether it will hold. I have my doubts, but if corn does stay under pressure, it will likely be due to USDA, weather, or U.S. harvest.

Sensationalized headlines, which score high in both trading algorithms and in online search engines, don't help. Not with market dynamics what they are these days.

To track my thoughts on the markets throughout the day, follow me on Twitter: www.twitter.com\Darin Newsom

(CZ/AG)

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