Sunday, January 8, 2012

Corn Production and Costs Up

A handful of local Chinese survey teams have released reports on this year's corn harvest. The results seem to confirm a big corn crop in China this year, but they also show escalating costs and prices. However, the reports are not nationally representative. There are 5 or 6 reports from Xinjiang but only one from the northeastern region. Most of these reports are based on small samples of farms, some as few as 9. The Hebei data are based on 411 farms spread over 45 counties. However, these numbers have some value as a check against the official statistics which come out months later and have been through a long process in which they may be massaged and distorted.

The one provincial report issued is from Hebei (a major corn-producing area but not the biggest one). The article describes corn as the "star" of agricultural commodities this year. Its production, planted area, price and profit were all up. In June Hebei's corn price surpassed the wheat price (an unusual occurrence) and the corn price has hit record highs. In contrast, the article says Hebei cotton farmers are not happy because production went up but price is down slightly from last year.

The table below shows results from 13 production cost survey reports the Dim Sums blog has been able to locate online. Yields for 2011 cover a wide range, from as high as 800-900 kg per mu in regions of Xinjiang to 358 kg in Nanyang where farmers had bad weather and had a late start on planting last spring. Most places said farmers had substantial increases in yields. The biggest increase was in Benxi, Liaoning Province, where yield was reportedly up 34%. Two districts in Henan had bad weather that led to declines in yields. In Qujing, Yunnan, the report says the yield was about the same as last year because last year was a good year. Henan Province published a report for all "fall grains" (which includes corn) showing an increase in yield of 15%.

China corn production, various locations, 2011
Location Province 2010 2011 increase
kg/mu kg/mu Percent
Hebei 456 480 5.4
Weishi Henan 450 404 -10.0
Xinxiang Henan 449 478 6.0
Nanyang Henan 404 358 -11.0
Zibo Shandong 468 516 10.0
Binhai Shandong 337 413 22.3
Benxi Liaoning 337 452 34.0
Hengdan Hebei 514 538 4.7
Huocheng Xinjiang 846 906 7.0
Fukang Xinjiang 625 699 11.8
Usu Xinjiang 804 827 2.9
Qujing Yunnan 450 450 0.0
Wanzhou Chongqing 503 514 2.2
Source: Local price bureau statistical reports on production costs compiled by

In Hebei yields were up 5.4%. Planted area was up slightly as well. The Hebei report cites good weather, dissemination of improved seed varieties, soil fertility testing, and techniques that allowed farmers to harvest their corn 3-to-5 days later than usual (allowing more time to grow and mature). Most of the reports give similar reasons (maybe this is what the party secretary told them to say).

The reports also show corn prices up 20 percent or more year-on-year. Hebei's report cites several reasons for increasing corn prices. One is the upward pressure from rising production costs. Second, industrial processors and feed mills have had strong demand for corn. The article says that demand for industrial products revived due to global economic recovery in 2011, citing higher profits for starch and alcohol. Livestock producers have been expanding in response to high pork and egg prices. The third reason for high corn prices is that farmers have been hesitant to sell, waiting for even higher prices. The article says on 9% of this fall's corn harvest has been sold--most is still in farmers' hands.

Production costs are up across the board. In Hebei the total production cost rose 15.8%. Cost increases included three broad categories: labor, land rent, and cost of materials and services. Most of the reports say seed costs have risen 20%-to-25%. The Hebei report says that seed producers have been hit by rising labor costs, packaging, transportation, fuel and marketing costs. Of course, when all farmers are buying more improved varieties of seeds the supply is likely to be less than perfectly elastic and prices will rise. Energy costs are also hitting Chinese farmers as they become more energy-intensive. Fuel and natural gas are boosting the cost of chemical fertilizers and mechanized services.

Of course, a massive corn harvest tends to put downward pressure on corn prices. Prices are still at high levels but they have been falling since October. According to the Hebei article, the decrease has been clearest for corn, which fell 7% from October to December. The article says grain prices as a whole have fallen 2% over that period.

No comments: