China S&D Estimates Jan 2018

A recent spurt in Chinese corn prices works against China's "supply side structural adjustment" which aims to shift production from corn to other crops to reduce excess supplies of corn. Profitability of corn could undermine these plans by inducing China's farmers to plant another huge corn crop this spring while the world is already awash in excess corn supplies.

The January 2018 China Agricultural Supply and Demand Estimates (CASDE) explained that farmers in the northeastern provinces have been holding back corn in anticipation of rising prices. The influx of cash from corn producer subsidies recently distributed allowed them to pay back loans without having to sell corn to generate cash; this allowed them to hold on to their corn longer. However, CASDE says the national average wholesale corn price is expected to remain stable at 1600-1700 yuan/mt, "constrained by high inventories."

An MOA news conference on the 2018 outlook for agricultural markets pronounced that the de-stocking of excess corn inventories and price-stabilization had surpassed expectations last year. In late December the average price of corn in northeastern provinces was 1580 yuan/mt, up 7.3 percent from the fourth week of October and 16.9 percent higher than a year earlier. In the north China plain the average corn price was 1660 yuan/mt, up 2.4 percent from late October and up 4.3 percent from a year earlier.

MOA agrees that corn looks profitable, but officials warned farmers not to "blindly" expand planting of corn this spring. They warned that there is little room for further increases in corn prices ahead of the Chinese Spring Festival holiday in February. Officials say changes in the corn markets are one of four topics to focus on  in 2018, and they called for local officials to continue urging farmers to switch from corn to minor grains and beans in marginal production regions as spring planting arrives.

China corn supply and demand (Ministry of Ag, Jan 2018)
Item	Unit	2016/17	2017/18 Nov	2017/18 Dec	2017/18 Jan
Planted area	1000 ha	36,768	35,100	35,445	35,445
Harvested area	1000 ha	36,768	35,100	35,100	35,100
Yield	Kg/ha	5,971	5,986	6,091	6,091
Production	MMT	219.55	210.11	215.89	215.89
Imports	MMT	2.46	1.50	1.00	1.20
Consumption	MMT	210.72	215.62	220.96	220.96
--Food	MMT	7.82	7.89	7.89	7.89
--Feed	MMT	133.03	135.03	138.35	138.35
--Industrial use	MMT	58.25	61.3	63.3	63.3
--Seed	MMT	1.61	1.5	1.59	1.59
--Loss and other	MMT	10.01	9.83	9.83	9.83
Exports	MMT	0.08	0.3	0.5	0.5
Surplus	MMT	11.21	-4.31	-4.57	-4.37

In their December 2017 CASDE report, MOA adopted the newly-released National Bureau of Statistics 215.89 mmt official estimate of 2017 corn production. This estimate is nearly 6 million metric tons larger than CASDE's previous estimate (210.11 mmt), making it hard to show that China is making progress in reducing its corn inventory. If the Bureua's larger estimate of production had been inserted in CASDE's November balance sheet without making adjustments, it would have meant that China's corn supply would have exceeded its consumption during 2017/18. CASDE avoided this by raising its estimate of corn consumption for animal feed, which gave the balance sheet a -4.57 mmt deficit in December. The January deficit was reduced to -4.37 mmt after the estimate of 2017/18 corn imports was raised to 1.2 mmt.

(Last year, CASDE ignored the National Bureau's higher estimate of 2016/17 corn production for about five months. This year CASDE adopted the Bureau's official estimate the same month it was announced.)

Ministry of Agriculture officials seem vexed by low international prices for corn and soybeans. At the MOA press conference, the director of economic information observed that low prices in international markets have been putting increasing pressure on Chinese grain and oilseed markets. CASDE notes that global corn supplies are abundant, and the C&F price of U.S. corn arriving at Chinese ports is 1550-1650 yuan/mt, down 100 yuan from the previous month and the lowest in two years, CASDE said. CASDE raised its estimate of corn imports based on strong demand.

CASDE's soybean analysis also cited downward pressure on U.S. soybean futures prices due to expectations of a big harvest in South America. The average C&F price of imported soybeans is 3050-3250 yuan/mt, while the average price of domestic soybeans is 4175-4375 yuan/mt. Estimated 2017/18 imports remained at 95.97 mmt. A slight reduction in domestic soybean production was the only change in CASDE's soybean balance sheet.

China soybean supply and demand (Ministry of Ag, Jan 2018)
Item	Unit	2016/17	2017/18 Dec	2017/18 Jan
Planted area	1000 ha	7,208	8,194	8,099
Harvested area	1000 ha	7,202	8,194	8,099
Yield	Kg/ha	1,796	1,817	1,802
Production	MMT	12.94	14.89	14.6
Imports	MMT	93.49	95.97	95.97
Consumption	MMT	108.11	110.56	110.56
--Crushing	MMT	92.90	94.38	94.38
--Food	MMT	11.18	12.04	12.04
--Seed	MMT	0.64	0.64	0.64
Loss and other	MMT	3.39	3.5	3.5
Exports	MMT	0.12	0.22	0.22
Surplus	MMT	0.01	0.08	-0.21

CASDE raised its estimate of 2017/18 cotton output to 5.64 mmt (slightly higher than the National Bureau of Statistics December estimate of 5.49 mmt). CASDE raised estimated cotton imports to 1.1 mmt. CASDE estimates that cotton stocks will fall from 8.75 mmt to 7.27 mmt during 2017/18.

China cotton supply and demand (Ministry of Ag, Jan 2018)
Item	Unit	2016/17	2017/18 Dec	2017/18 Jan
Begin inventory	MMT	11.11	8.75	8.75
Planted area	1000 ha	3,100	3,293	3,293
Yield	Kg/ha	1,555	1,662	1,714
Production	MMT	4.82	5.47	5.64
Imports	MMT	1.11	1.00	1.10
Consumption	MMT	8.09	8.22	8.22
Exports	MMT	0.01	0.01	0.01
End Inventory	MMT	8.94	7.00	7.27

China edible oils supply and demand (Min Agriculture, Jan 2018)
Item	Unit	2016/17	2017/18 Dec	2017/18 Jan
Production	MMT	27.36	27.81	27.82
--Soy oil	MMT	16.27	16.51	16.5
--Rapeseed oil	MMT	5.74	5.71	5.71
--Peanut oil	MMT	3.18	3.26	3.26
Imports	MMT	5.78	6.28	6.03
--Palm oil	MMT	3.34	3.75	3.85
--Rapeseed oil	MMT	0.8	0.85	0.85
--Soy oil	MMT	0.71	0.65	0.3
Consumption	MMT	31.68	31.9	31.9
--Urban	MMT	22.97	23.4	23.4
--Rural	MMT	8.71	8.5	8.5
Exports	MMT	0.17	0.17	0.17
Surplus	MMT	1.29	2.01	1.78

China sugar supply and demand, January 2018
Item	Unit	2016/17	2017/18 Dec	2017/18 Jan
Planted area	1000 ha	1396	1456	1456
--sugar cane	1000 ha	1225	1267	1267
--sugar beets	1000 ha	171	189	189
Yield
--sugar cane	MT/ha	61.8	60	60
--sugar beets	MT/ha	55.2	52.5	52.5
Sugar output	MMT	9.29	10.35	10.35
--sugar cane	MMT	8.24	9.15	9.15
--sugar beets	MMT	1.05	1.2	1.2
Imports	MMT	2.29	3.2	3.2
Consumption	MMT	14.9	15	15
Exports	MMT	0.12	0.07	0.07
Surplus	MMT	-3.44	-1.52	-1.52