China Corn Stocks Unlikely Building

U.S. Grains Council forecasts China's corn crop should reach slightly above 120 million metric tons, on target with USDA's estimates. Jacqui Fatka

China won't have an excellent crop this year, but it will have a good crop. This from U.S. Grains Council (USGC) Beijing office director Todd Meyer, who also predicts a relative production increase of 5% compared to last year's 115.8 million metric tons to an estimated 120-122 million metric tons crop for 2004.

In its annual USGC China corn tour, Meyer says he saw many areas returning to more normal yield levels. The northeast China province of Shandong saw yields increase by about 10% and will contribute to this year's overall increase in crop size compared to last year. Hainan, located on the southern inland portion of China, showed the greatest amount of increase in production, Meyer reports.

He adds that the feeling among Chinese traders is that China will potentially export and import approximately the same amount of corn, creating a net trade of zero. A lot of that will depend on timing and prices. As harvest rolls in, pressure is dropping with the new crop.

Demand is a murky equation, Meyer says. There's a lot of enthusiasm to raise hogs by both large and small producers. Last year many provinces experienced large doses of disease, potentially from moldy and low-quality corn from 2003. Consumption suffered with SARS and avian influenza. However, some changes occurred in availability of substitutes for corn with wheat and rice prices soaring higher in some parts of the country.

Meyer adds that he doesn't feel like stocks are building in China. "I believe we've got growth in the market if we don't have another outbreak of avian influenza and see continued economic growth increase," he says. "I think even at a 120 plus million ton crop, we'll still see a draw down of stocks."

China is faced with a finite amount of land available for agriculture and development and other uses continues to take a slight reduction of agricultural land each year. Yields are relatively high compared to other developing countries, but China will need to depend on the adoption of new technologies including biotechnology to increase production in the future, Meyer says.

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