China Issues First Ag S&D Report

China's Ministry of Agriculture issued its first China Agricultural Supply and Demand report this week, taking a long-awaited step toward providing useful information on agricultural markets. Several private companies in China have been selling reports like this by subscription for years, but this is the first report with regular agricultural supply and demand estimates to be released by a Chinese government agency to the public without charge.

The China Agricultural Supply and Demand Estimates (CASDE) includes supply and demand balance sheets for corn, soybeans, cotton, vegetable oils, and sugar, plus a brief narrative explaining supply and demand conditions for each commodity. (Notably, rice and wheat are excluded--perhaps these commodities are too sensitive to discuss.) The report appears to be modeled on the USDA's WASDE report, although it only covers a few commodities and is limited to China's S&D situation. The report contains S&D estimates for market years 2014/15, 2015/16, and 2016/17. The report will be released monthly with updated estimates, and can be downloaded free from the Ministry of Agriculture web site (it is in pdf format in Chinese).

The CASDE's estimates of China's corn S&D indicate a larger build-up of inventories than the USDA's WADE. The Chinese estimates have lower consumption of corn than USDA's report and larger imports for the current year. While the world is awash with corn, the CASDE sees only a 3-percent decrease in China's corn output in 2016/17. According to the CASDE, China's feed use of corn will rebound with the recovery of the livestock sector, and they say consumption will be stimulated by a subsidy for processors and "reform of the corn reserve policy." Corn imports will drop from 4.6 million tons in 2015/16 to 2.4 million tons in 2016/17, due to the closing of the gap between Chinese and international corn prices. China will continue to increase its corn inventory by 9.49 million tons during 2016/17. However, the build-up of corn inventories will be slower than during 2014/15 (+37.8 million tons) and 2015/16 (+36 million tons). The inventory increases estimated by the CASDE are faster than USDA's WASDE estimates, but not as rapid as some other estimates coming out of China. (Actual corn inventories are not reported, since these are a "state secret.")

China corn balance sheet (China Ministry of Ag, July 2016)
Item	Unit	2014/15	2015/16	2016/17
Sown area	1000 HA	37,123	38,117	36,026
Yield	KG/HA	5,809	5,892	5,952
Production	Mil MT	215.70	224.58	214.27
Imports	Mil MT	5.52	4.60	2.40
Consumption	Mil MT	183.39	193.25	206.98
--food	Mil MT	7.52	7.65	7.72
--feed	Mil MT	112.56	120.61	131.99
--seed	Mil MT	1.69	1.66	1.61
--waste and other	Mil MT	9.05	9.56	9.81
Exports	Mil MT	0.01	0.03	0.20
Inventory change	Mil MT	37.82	36.00	9.49

The CASDE report anticipates a modest rebound in China's soybean output for 2016/17, but it will play an essentially inconsequential role in meeting China's demand for over 99 million tons of soybeans expected next year. The increase in imports is characteristically conservative, nudging up from just under 84 million tons in 2015/16 to 85 million tons in 2016/17.

China soybean balance sheet (China Ministry of Ag, July 2016)
Item	Unit	2014/15	2015/16	2016/17
Area	1000 HA	6,800	6,590	7,156
Yield	KG/HA	1,787	1,762	1,783
Production	Mil MT	12.15	11.61	12.76
Imports	Mil MT	78.35	83.76	85.00
Consumption	Mil MT	89.83	95.84	99.42
--crushing	Mil MT	77.34	82.69	85.20
--food	Mil MT	9.15	9.71	11.18
--seed	Mil MT	0.50	0.54	0.56
--loss & other	Mil MT	2.84	2.90	2.48
Exports	Mil MT	0.14	0.13	0.18
Inventory change	Mil MT	0.53	-0.60	-1.84

China's cotton demand remains weak--as it has been since 2008. Both production and consumption of cotton will fall during 2016/17, according to CASDE. The decline in cotton production is attributed to the cut in the Xinjiang target price and generally falling cotton prices in China. Production is falling faster than consumption, and cotton imports remain at the much slower pace set during 2015/16. Still, CASDE expects cotton stocks to fall only about 1.5 million tons; the ending inventory for 2016/17 will still be 140% of annual consumption. 

China cotton balance sheet (China Ministry of Agriculture, July 2016)
Item	Unit	2014/15	2015/16	2016/17
Beg. Inventory	Mil MT	12.40	12.80	11.66
Area	1000 HA	4,219	3,433	3,100
Yield	KG/HA	1,460	1,514	1,510
Production	Mil MT	6.16	5.20	4.63
Imports	Mil MT	1.67	0.92	0.93
Consumption	Mil MT	7.40	7.24	7.12
Exports	Mil MT	0.02	0.02	0.02
End Inventory	Mil MT	12.80	11.66	10.09

Soybean oil production will rise, driven by increased imports of soybeans, says CASDE. Rapeseed oil production will drop due to a 20% decrease in rapeseed production due to elimination of its price support policy. 

China vegetable oils balance sheet (Min Ag, July 2016)
Item	Unit	2014/15	2015/16	2016/17
Production	Mil MT	26.12	25.59	25.38
--Soy oil	Mil MT	14.01	14.82	15.15
--Rapeseed oil	Mil MT	6.92	5.77	5.25
--Peanut oil	Mil MT	3.03	3.00	3.08
Imports	Mil MT	6.14	5.57	5.27
--Palm oil	Mil MT	4.07	3.60	3.40
--Rapeseed oil	Mil MT	0.73	0.82	0.75
--Soy oil	Mil MT	0.77	0.60	0.58
Consumption	Mil MT	30.80	31.17	31.38
--Urban	Mil MT	20.17	20.41	20.55
--Rural	Mil MT	10.64	10.76	10.82
Exports	Mil MT	0.14	0.12	0.11
Inventory change	Mil MT	1.31	-0.13	-0.84

China's sugar imports are estimated at 3.5 million metric tons during both 2015/16 and 2016/17. Production will bounce back during 2016/17 while consumption remains relatively steady. 

The CASDE report is a major improvement over past reports. The narrative conveys reasoning behind key numbers. In contrast, a series of monthly reports issued over the last several years included no balance sheets and mostly consisted of reading off import and price statistics with little or no interpretation. The CASDE report, importantly, lists dates when future monthly reports will be released. Past reports were released sporadically or not at all. In the CASDE, each commodity narrative is signed by a Ministry of Agriculture analyst and contact information is given. This is a major innovation in Chinese bureaucracy where no one below the top leadership ever wants to offer opinions or take responsibility for anything. 

The CASDE report complements related Ministry of Agriculture activities, including an annual "outlook conference" and ten-year projections released each of the past two years. These activities also appear to be at least partly modeled on the USDA outlook conference and the ten-year projections made by USDA and OECD/FAO. 

There is no confirmation of the rumor that the release of the first CASDE report is linked to the Martian study team's visit reported on this blog two months ago. That team was alarmed to find that the world's largest agricultural country issued no reports on agricultural supply and demand information. As we understand it, taking advice from Martians is not part of the "China Dream," so the rumor can't possibly be true.

China commodity prices (RMB per metric ton)
			Year
Commodity	Description	2014/15	2015/16	2016/17
Corn	production areas	2266	1830-1930	1550-1750
	C&F imports	1643	1500-1670	1650-1850
Soybeans	production areas	4675	4275-4475	4350-4550
	C&F imports	3265	2925-3125	3100-3300
Cotton	Domestic 3128B	13894	12500	12500-14500
Soy oil	Domestic ex-factory	5500-5900	5600-6300	5700-6400
	C&F imports	5400-5900	5500-6200	5600-6400
Palm oil	C&F imports	4300-5500	4300-5800	4400-6000
Rapeseed	ex-factory	6000-6500	5900-6400	6000-6500
Peanut oil	ex-factory	13400-14600	14000-15500	14400-15400
Sugar	Domestic	4877	5400-5700	5600-6400