At a March 7 press conference, China's Minister of Agriculture warned farmers not to "blindly" expand planting of corn this spring, pointing out that government reserves are still high and international prices are still relatively low. Other analysts attribute a suddenly-tight corn market to rapid disposal of corn stockpiles.
Minister Han Changfu advised listeners that China's strategy in agriculture is to let the market have a decisive role in resource allocation. He then ordered farmers not to respond to recent increases in market prices that are prompting them to expand corn planting this spring. Minister Han warned that an expansion of corn-planting--especially in regions that don't have a comparative advantage in growing corn--would reverse the Ministry's "supply side structural adjustment" designed to reduce excess corn production capacity. Minister Han urged farmers to continue the structural adjustment by planting crops that are "demanded by the market."
The Ministry's March China Agricultural Supply and Demand Estimates reported that the price for corn has been rising as supplies of new corn get tight. The March report increased its estimate of 2017/18 corn consumption by 1.5 million metric tons to 224 mmt to reflect the tighter market conditions. This reflected an increase in industrial use of corn to 64.8 mmt. Industrial processors are restarting production after the Lantern Festival holiday and adding to inventories, the MOA report said. Auctions of government corn reserves are due to resume--perhaps later this month--which MOA says will relieve upward pressure on prices.
The MOA report shows a -6.72 mmt deficit between supply and demand for 2017/18. However, MOA warns that the corn market still faces pressure from high inventories which will prevent prices from rising too much. MOA expects the wholesale price of corn in production regions to remain in the 1600-1700 yuan/mt range.
An analysis by futures market analysts says China's corn market has already shifted from surplus to shortage and estimates a supply-demand deficit of -48 mmt for 2017/18. These analysts think China's corn stockpile could be cut nearly in half from its 2016 peak after a further 60-mmt sales of corn reserves this year.
Their estimates are based on corn auction results: 57 mmt auctioned during 2016/17 less 21-mmt new corn procured for reserves equals a net decline of 36 mmt. However, they think 20-mmt of this injection of corn was carried over into 2017/18 as commercial inventories. That means they think the supply-demand deficit for 2016/17 was -16 mmt.
These analysts see a much bigger S&D deficit for 2017/18 of -48 mmt which they attribute to: a decline in production, a decline in imports of sorghum imports, and an increase in industrial use. It's not clear how they got this number.
The analysts estimate that lower corn prices have increased capacity utilization of corn processors by 10-15 percentage points. Moreover, they estimate that 6.8 mmt of new processing capacity was brought on line during 2017, and 12 mmt more is planned for 2018. China's National Grain and Oils Center is more bullish than MOA on industrial use of corn, estimating a 14-mmt increase to 68 mmt in 2016/17 and a further 10-mmt increase in 2017/18 to 78 mmt.
These analysts estimate that imports of corn, sorghum, barley, DDGS, and cassava replaced 16.5 mmt of corn during 2016/17, 5 mmt less than the previous year. They think the antidumping investigation will further reduce imports of U.S. sorghum this year by 2.5 mmt.
Minister Han Changfu advised listeners that China's strategy in agriculture is to let the market have a decisive role in resource allocation. He then ordered farmers not to respond to recent increases in market prices that are prompting them to expand corn planting this spring. Minister Han warned that an expansion of corn-planting--especially in regions that don't have a comparative advantage in growing corn--would reverse the Ministry's "supply side structural adjustment" designed to reduce excess corn production capacity. Minister Han urged farmers to continue the structural adjustment by planting crops that are "demanded by the market."
The Ministry's March China Agricultural Supply and Demand Estimates reported that the price for corn has been rising as supplies of new corn get tight. The March report increased its estimate of 2017/18 corn consumption by 1.5 million metric tons to 224 mmt to reflect the tighter market conditions. This reflected an increase in industrial use of corn to 64.8 mmt. Industrial processors are restarting production after the Lantern Festival holiday and adding to inventories, the MOA report said. Auctions of government corn reserves are due to resume--perhaps later this month--which MOA says will relieve upward pressure on prices.
The MOA report shows a -6.72 mmt deficit between supply and demand for 2017/18. However, MOA warns that the corn market still faces pressure from high inventories which will prevent prices from rising too much. MOA expects the wholesale price of corn in production regions to remain in the 1600-1700 yuan/mt range.
An analysis by futures market analysts says China's corn market has already shifted from surplus to shortage and estimates a supply-demand deficit of -48 mmt for 2017/18. These analysts think China's corn stockpile could be cut nearly in half from its 2016 peak after a further 60-mmt sales of corn reserves this year.
Their estimates are based on corn auction results: 57 mmt auctioned during 2016/17 less 21-mmt new corn procured for reserves equals a net decline of 36 mmt. However, they think 20-mmt of this injection of corn was carried over into 2017/18 as commercial inventories. That means they think the supply-demand deficit for 2016/17 was -16 mmt.
These analysts see a much bigger S&D deficit for 2017/18 of -48 mmt which they attribute to: a decline in production, a decline in imports of sorghum imports, and an increase in industrial use. It's not clear how they got this number.
The analysts estimate that lower corn prices have increased capacity utilization of corn processors by 10-15 percentage points. Moreover, they estimate that 6.8 mmt of new processing capacity was brought on line during 2017, and 12 mmt more is planned for 2018. China's National Grain and Oils Center is more bullish than MOA on industrial use of corn, estimating a 14-mmt increase to 68 mmt in 2016/17 and a further 10-mmt increase in 2017/18 to 78 mmt.
These analysts estimate that imports of corn, sorghum, barley, DDGS, and cassava replaced 16.5 mmt of corn during 2016/17, 5 mmt less than the previous year. They think the antidumping investigation will further reduce imports of U.S. sorghum this year by 2.5 mmt.
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