China’s National Bureau of Statistics revised the country’s area, yield and production estimates for corn, wheat and rice for the last decade in October, reported the U.S. Department of Agriculture’s Foreign Agricultural Service. According to its November World Agricultural Supply and Demand Estimates report, China reached all the way back to 2007-08 to report:
• 266 million more tons of corn production;
• 20 million tons of wheat production; and
• 18 million more tons of rice production.
While just over half of that additional corn volume was added to stocks, the total domestic consumption was adjusted to show China’s greater domestic use for feed, residual disappearance and ethanol. These new numbers are not expected to change corn exports, however, since China’s corn is still more expensive compared to world levels.
As for wheat, most of China’s increased numbers were added to its stocks, and per-capita consumption still appears to be stable. While China’s wheat stocks are forecasted to account for just more than half of all global wheat stocks, so far they are still held for domestic use only and not flooding the world market.
China’s rice stocks account for more than two-thirds of global rice stocks, which are at a record. The WASDE report predicts that wheat and rice production in China to be lower in 2018-2019. Therefore the country will continue to hold onto those stocks, despite limited sales from their current state reserves.
Wheat
The WASDE report shows that global wheat production is up this month, with a larger crop now reported in China, and reduced crops in Australia, Morocco, Pakistan and Ukraine. Trade is down slightly for the month, with lower import demand from Bangladesh, China, Indonesia, Thailand and Vietnam. Australia’s drought continues, thus lowering its wheat exports. The United States season-average farm price for wheat was unchanged at $5.10 per bushel.
The report stated that in general wheat prices domestically for the U.S. were relatively flat, based on pressure from a weak pace of export sales.
“For October, prices were mostly up from the previous month, based on tightening competitor supplies,” the report stated. Soft White Winter was the winner with a gain of $6 per ton to the price of $237 per ton, based on the drought in Australia and its tighter supplies to the world export market. Hard Red Spring and Soft Red Winter both saw price gains at $8 per ton and $1 per ton, respectively. However, Hard Red Winter dropped $3 per ton, down to $235, facing continued weakness in international demand.
The report also showed other world wheat trade changes in 2018-2019:
• Australia exports are predicted to drop 1.5 million metric tons, due to drought and uncompetitive prices;
• China imports are predicted to drop by 500,000 metric tons, because of its larger domestic production and the trade environment;
• Indonesia will reduce its imports by 500,000 metric tons based on lower food consumption and uncompetitive Australian wheat prices.
• Turkey is expected to increase its imports of wheat grain by 200,000 metric tons based on its rising flour exports. Likewise the European Union is expected to increase its imports based on a smaller domestic crop.
• Vietnam is expected to reduce its wheat imports, substituting other grains for feed wheat.
Corn
The WASDE report stated that global corn production, aside from China, saw gains for Ukraine and Argentina that offset the reductions in the European Union and the U.S.
“Global trade is up with greater imports for the EU, Iran and Vietnam,” the report stated. “Exports for Ukraine are expected at a record. The U.S. season-average farm price is raised 10 cents to $3.60 per bushel.” This reflects stronger global demand, prices to date and smaller stocks.
The Black Sea region of Ukraine and Russia is the spoiler in the world corn markets. WASDE projects corn production in the region to bounce back to a record 44.8 million metric tons in 2018-2019. “With rising acreage and improving yields, the Black Sea region is increasing its footprint as one of the key global suppliers of corn,” the report stated.
Still, domestic use in the Black Sea region lags due to limited growth in livestock and poultry sectors from disease and economic uncertainty. Food, seed and industrial use is stagnant, and there’s limited storage capacity and economic incentives to store corn.
This means that Black Sea exports are projected to rise, and beyond the typical markets of North Africa, the EU, China and the Middle East. With this much production, experts predict that Black Sea corn suppliers will compete indirectly with U.S. exports, especially since it can offer lower prices and bio-tech free corn. The currency volatility in Brazil and Argentina’s export policy changes add to the Black Seas as being the key corn supplier in the coming year.
China’s corn demand will be another key story in corn trade in the coming year, the report predicts.
“Various trade sources have noted that China has sold around 100 million tons of corn from the reserves via auctions through the end of October 2018,” the report stated. “The volume represents nearly 40 percent of forecast domestic consumption for 2017-2018. Despite that huge volume coming onto the market, prices in the key consuming and producing regions have remained elevated even at harvest time, reflecting strong demand for corn.”
China is using more corn instead of higher priced soybean meal, and expanding its fuel ethanol production to reach its nationwide target of E10 by 2020. The domestic demand isn’t showing signs of slowing anytime soon, with greater industrial use and limited supplies of alternative, typically imported, feedstuffs like sorghum and distiller’s grains.
To see the full report, visit www.usda.gov/oce/commodity/wasde/.
Jennifer M. Latzke can be reached at 620-227-1807 or [email protected].
