China's corn stocks revised up 15%, British paper says FAO figure still too low

Cankaoxiaoxi.com reported on April 7 after the United Nations Food and Agriculture Organization recently “sharply revised up” its estimate of China's corn stocks, concerns that China's corn demand may have been severely overstated were further confirmed.

According to a report on the website of the British Financial Times on April 5, the FAO estimated global corn stocks in a recently released world agricultural supply and demand brief, and it historically revised up China's corn stocks. Corn is a major source of feed for livestock and poultry.

The organization raised its estimate of China's corn stocks for the 2014-2015 agricultural year by 15% to 95.4 million tons. In January this year, the US Department of Agriculture sharply lowered its medium-term forecast for China's corn import demand.

The FAO's new estimate of China's corn stocks is another blow to major grain-exporting countries such as the United States and to some large agricultural commodity traders, because they have been preparing for China to increase corn imports.

China is already the world's largest soybean importer. Some agribusinesses and corn growers had previously expected that, as national income levels rise, demand for meat would grow. Therefore, China's corn imports would also increase in the next few years.

In 2014, the US Department of Agriculture predicted that China would become the world's largest grain importer. However, growing evidence shows that China's grain stocks are increasing and demand is falling. This has caused the market to rethink.

Last year's long-term forecast for China's grain imports in 2023-2024 was 22 million tons, and the FAO has lowered it to 6.5 million tons.

The FAO said it lowered its estimate of China's corn consumption from 2004-2009. This means additional supply turned into stocks.

Therefore, the organization revised up China's corn stocks over the past decade, with the estimate for China's corn stocks in 2014-2015 increased from 82.7 million tons to 95.4 million tons. That figure is higher than the estimates of the US Department of Agriculture and the International Grains Council, whose estimates were 79.2 million tons and 85.7 million tons respectively.

FAO senior economist Abdolreza · Abbassian said the concern is that such an estimate may still underestimate China's corn stocks, “some Chinese exporters told us that the figure of 95.4 million tons is still too low.”

The report said that in 2012 and 2013, China's grain production had consecutive bumper harvests, while grain consumption declined somewhat over the past few years. Therefore, the FAO's upward revision of China's corn stocks comes at just the right time.

[Extended Reading] China imports large amounts of Ukrainian corn; British media: US corn is being snubbed

Cankaoxiaoxi.com reported on March 18 Foreign media said that in 2015, the world's second-largest corn consumer, China, had ordered more than 600,000 tons of corn from Ukraine. As Chinese reserves tighten supply and domestic market prices rise, China may make more deals.

According to a Reuters report on March 17, China's imports of corn from the Black Sea country Ukraine under the terms of the China-Ukraine grain loan agreement are seen as a blow to US corn exporters. US corn production has reached a new high, and exporters are struggling to sell.

Under pressure from China's purchases of Ukrainian corn, US corn futures closed lower on March 17 for the fourth consecutive day, with prices falling to their lowest point in six weeks.

The report said that one buyer said some Ukrainian corn scheduled for shipment in April to May 2015 was priced at 1,500 yuan per ton (about 240 US dollars), including the cost of goods and freight. That price is 60% lower than the domestic corn price; the benchmark corn price at the main port in Shenzhen was 2,490 yuan per ton.

Traders said US corn was priced 80 yuan per ton lower than Ukrainian corn (about 13 US dollars). The buyer said that by the end of this month or next month, some factories hope to obtain import quotas.

Traders also said that reserves in Beijing have tightened domestic supply, and over the past two weeks China's domestic corn price rose by 100 yuan per ton (about 16 US dollars).

The report said that under the terms of the bilateral grain loan agreement, Ukraine shipped about 1 million tons of corn to China in 2014. In March, Ukraine said it hoped its total corn shipments to China could double in 2015.

Official import data show that in January 2015, Ukraine shipped 470,047 tons of corn to China, exceeding the United States.

The report said that between 2009 and 2010, China began large-scale corn imports, with most imported corn coming from the United States; however, starting in 2014, China shifted to importing corn from Black Sea region suppliers.

Traders believe that after US suppliers began requiring buyers to bear the potential risks of importing genetically modified corn, US corn became less popular among Chinese buyers.

When asked why Chinese buyers did not order cheaper US corn, a manager at a state-owned securities exchange said: “Suppliers have changed the contract terms, that is the reason.”

The report said that Agrisure Viptera, namely MIR 162 genetically modified corn, triggered a series of legal disputes related to US grain exports. In 2014, Beijing's refusal to import this genetically modified corn caused US agricultural losses of 2.9 billion US dollars.

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Farmers in Shandong Province, China, are loading corn kernels (photo source: Reuters)

(2015-03-18 00:33:00)

[Extended Reading] US Department of Agriculture sharply lowers China's corn import forecast

Earlier this month, risk forecasts for China's agricultural products market were validated, as the US Department of Agriculture (USDA) sharply lowered its forecast for China's corn imports.

Last year, the USDA estimated that China would become the world's largest corn importer. But growing evidence showed that China's rising stocks and declining demand prompted the USDA to change its mind and sharply lower its forecast. Last year, the USDA's long-term forecast for China's corn imports in 2023/24 was 22 million tons, and it has now been lowered to only 6.5 million tons.

Fred • Gale, a senior economist at the USDA Economic Research Service, said: “Over the past 18 months or so, the overall situation has indeed changed.”

In 2011 and 2012, China's demand for overseas corn, especially US corn, rose, leading analysts inside and outside China to predict that China would become a net corn importer. Corn is mainly used as feed for livestock and poultry and in processed foods.

So what happened?

After record production in 2012 and 2013, consumption suddenly declined, and China found itself with large corn stocks.

The USDA said in its latest report on China's agricultural imports: “It may take China years to digest such a massive surplus of stocks.”

During the 2013/14 crop year, as the Chinese government bought domestic corn to support the corn market, corn reserves also increased. Official corn stocks rose to 100 million tons, about half of China's annual consumption.

Gale said another factor was the surge in China's imports of sorghum and barley, both corn substitutes. According to USDA data, in the 2014/15 crop year, imports of sorghum and barley, which unlike other grains have no import quota restrictions, soared from 1.7 million tons in 2010/11 to 11.5 million tons.

The USDA said that although the Chinese government auctioned 63 million tons of corn to reduce stocks, only 25 million tons were sold. Even so, the Chinese government still announced it would purchase corn harvested in 2014 to support prices. Current corn stocks are at a 14-year high.

Although China will eventually still turn to corn imports, China may work to minimize import volumes. According to the USDA report, Chinese government officials regard agricultural imports as inevitable but do not seem to trust the international market.

The report said: “In China's soybean industry, imports and foreign-funded enterprises are clearly dominant, which strongly affects the food security strategy, and these are seen as potential threats to China's soybean supply.”

This attitude helps explain China's moves in food trade over the past few years. In order to give Chinese importers greater price bargaining power while reducing the risk of a possible trade embargo, China has diversified its sources of food imports. For example, in 2012, as imports of corn from the United States increased, the Chinese government opened its market to corn produced in Argentina and Ukraine.

Second, China aims to gain greater control over the supply chain for its agricultural imports through overseas investment. State-owned enterprise COFCO formed an agricultural joint venture with Noble Group and also bought a controlling stake in Dutch agricultural trading group Nidera; these moves appear to follow the above strategy.

The report said that expanding overseas investment will allow Chinese enterprises to obtain more profits, secure reliable supply for the domestic market, and exert greater influence on international prices.

(Source: FT Chinese Network Translator/Liang Yanshang)

(2015-03-01 10:03:00)

[Extended Reading] US Agriculture Secretary: China approves import of Syngenta genetically modified corn

Sina Finance news on the 18th, according to a Wall Street Journal report, US Agriculture Secretary Vilsack said that China's Ministry of Agriculture has approved the import of a controversial genetically modified corn, Syngenta's Agrisure Viptera; a year earlier, China had returned shipments of corn said to contain unapproved ingredients.

Vilsack said that Chinese Vice Premier Wang Yang told him at a meeting of Chinese and US officials in Chicago that this corn and two genetically modified soybeans had been allowed for import.

Vilsack also said that he and Wang Yang agreed that a high-level strategic dialogue needed to be held to discuss general innovation in the agricultural sector.

Syngenta submitted this corn to Chinese regulators for review in 2010.

Article keywords: corn genetically modified Syngenta

(2014-12-18 10:48:12)