What impact will Trump's election have on domestic corn

On November 6th, Trump won the 2024 presidential election and will officially take office on January 20th, 2025. During the campaign, Trump repeatedly stated his intention to implement more aggressive tariff policies, and the market is also concerned about the possibility of a new round of trade war between China and the United States. Looking back at the timeline of Trump's previous election, he was elected as the 45th President of the United States in November 2016, sworn in on January 20, 2017, signed the first phase of the China US trade agreement on January 15, 2020, and in October 2020, China's monthly imports of US corn exceeded 1 million tons for the first time.

China's import corn policy has been tightened ahead of schedule

When Trump is re elected, the main concern for corn varieties is still the import of US corn. If a new round of trade war occurs, the impact on China's corn market will be relatively small in the countermeasures stage. Since April this year, China's policy has already restricted the import of corn, and in August this year, the import of sorghum and barley has been restricted. Therefore, for corn and corn substitutes, the import restriction policy has already been implemented. Therefore, in the future countermeasures stage against Trump's tariff policy, the impact on corn varieties will be small. The main concern is whether there will be a large amount of imported US corn again in the agreement signed after the countermeasures end.

The previous round of Trump policies had a significant impact on China's imported corn

Looking back at the trade situation during the previous Trump administration, after the signing of the first phase of the China US trade agreement on January 15, 2020, China began to import a large amount of US corn. 2020 was also the first year since China implemented a quota system for imported corn (7.2 million tons) to exceed the quota. In 2020, China's annual corn import volume was 11.29 million tons, and the largest source country for imported corn also changed from Ukraine to the United States. From the perspective of corn year, China imported 29.56 million tons of corn in 2020/21, of which nearly 70% came from the United States at 20.45 million tons. After Trump's re-election failed in December 2020, China's imports of corn from the United States have been decreasing year by year. In 2021/22, China's imports of corn from the United States were 15.47 million tons, 7.82 million tons in 2022/23, and 2.99 million tons in 2023/24.

Since the launch of the new season of corn in the United States in September this year, China has only received 10000 tons of new purchase orders so far. China's willingness to import corn from the United States is close to freezing point, and the profit margin for importing corn from the United States is still high. However, the decline in China's import willingness is mainly due to policy restrictions. Since 2020, most of China's imported corn that exceeded the quota has entered the national reserve warehouse, with a large accumulation of inventory and a small outflow, which has now formed inventory pressure. The reason why China has started to restrict the import of corn, sorghum, and barley this year is speculated by the market to be due to the high inventory of policy grain reserves.

There is a significant difference in the fundamentals of China's corn market between this year and 2020

Trump was elected, and the market is concerned that China's policies will once again open up its import policy towards US corn. After all, this was the biggest source of impact on Chinese corn varieties during the previous Trump term. In terms of profits, the author estimates that the current taxable profit of US corn imports still exceeds 300 yuan/ton. However, there is still a big difference between China's corn market this year and 2020. At that time, China's corn market was in a stage of clearing temporary corn inventory and needing a large amount of corn to supplement the gap. The large-scale import of US corn was in line with the industry demand at that time. Corn prices also rose continuously that year, and farmers had high profits and enthusiasm for corn planting. However, this year, the current domestic corn prices are close to the cost line, and the national policy grain reserves are also relatively high. If we open up the import of US corn now, it is expected to have a significant negative impact on the market, which is not in line with the original intention of protecting the interests of farmers and stabilizing market prices.

Trump's election has limited short-term impact, but the long-term impact is bearish

From a timeline perspective, Trump will not officially take office until January next year, and the tariff policy and countermeasures phase will also last for a period of time. The last round of Trump took three years from taking office to signing the trade agreement. Even after the 2020 trade agreement was signed, there is still a relatively long time interval from formulation to implementation. Therefore, in the short to medium term, the impact of Trump's election on corn varieties is still very small. In the medium to long term, if China's policy of grain destocking is effective this year, it is not ruled out that the demand for imported corn will increase in the next year. However, even if imported corn is reopened, it is expected that most of the excess imports will enter the national reserve, similar to the rotation of imported corn inventory. Therefore, the impact of Trump's election on the supply and demand of the corn market during the year is still relatively limited, and the impact in the medium to long term will be bearish.