November 27, 2013
China''s 2013 corn production rises 2%
A recent USDA GAIN report revealed that China will produce 210 million tonnes of corn this year on slightly lower acreage but a 2% increase in average yield.
While production is strong, demand for corn in China is expected to weaken to 214 million tonnes, down eight million tonnes from USDA''s previous estimate. Demand for industrial use of corn and feed has weakened. In the first half of this year, outbreaks of avian flu and other animal diseases affected China''s poultry and swine industries and hurt demand for pork products. But demand for US corn remains strong.
"There is a lot of demand for imported corn from the US due to the price differential, especially now that US prices have fallen," says Fred Gale, USDA Economic Research Service senior economist specialising in China.
China''s estimated imports of corn for the 2013-14 crop year remained stable at seven million tonnes. Chinese cornis priced over US$10 per 0.25 tonne in southern China, and US corn including shipping, tariff and taxes is under US$8 per 0.20 tonne, so it makes economic sense for China to import corn, says Gale.
In order to capitalise on low US corn prices, some feed mills in China have reportedly already contracted for shipments to arrive in the first half of 2014 based on quotas that will not be allocated until sometime next year.
Due to strong domestic production and large stocks of corn, China is unlikely to increase its annual tariff rate quotas (TRQs) above the current 7.2 million tonnes, according to USDA.
China''s 2013-14 ending stocks are estimated at about 30% of use at 65.4 million tonnes, 8.5 million tonnes higher than the previous estimate. More than half of the stocks are held by state reserves. In the 2012-13 crop year alone, the government bought 30 million tonnes of corn for temporary reserve under a government programme to protect farmer income through supporting corn prices. China is expected to continue its purchase programme for corn as a way to support farm income in the current marketing year.
Typically, state reserves are offered for sale when prices rise, usually late in the marketing year. However, this year prices have remained flat due to softening demand for feed and industrial use.
Gale added that in short-term view, China won''t become the large demand base for corn that some people hope. Longer term, however, the country will import more corn because its livestock sector is growing and its production systems are shifting away from home-grown fodders toward rations that use more corn.