China, which holds 60% of world cotton in its inventories,
and has its highest sugar stocks in more than a decade, is on track for mega
stockpiles of corn too – boding ill for a revival in imports.
China's corn inventories will end this season at 80.6m
tonnes, the International Grains Council believes, a forecast 3.4m tonnes
higher than that of the US Department of Agriculture, whose estimates are
highly influential on world market.
"Chinese corn stocks appear large, with central reserves
boosted by record crops, heavy government buying and slower growth in domestic
demand," the council said.
And in 2014-15, stocks will build a further 6.7m tonnes to
87.3m tonnes – equivalent to 49% of the world total, according to the IGC, an
estimate nearly 10m tonnes above the USDA's figure.
Ironically, China's corn prices remain high despite the high
stocks, being "underpinned by government support measures", the council said.
This is a situation which echoes that of cotton, in which
high guaranteed values have led to the huge inventories, but also kept domestic
market prices high – although it is unclear that China will be as concerned
over high inventories of corn, a feed grain, as it is over a crop not linked to
the food chain.
Indeed, in the important southern consuming region of Guangzhou,
corn prices have topped $400 a tonne, equivalent to more than $10 a bushel, well
over twice the level of Chicago futures.
Even factoring in freight and other costs, such as VAT at
13% and 1% import duties, prices are some 30% above the price of imported US
corn, an "unusually wide" gap, the council said.
'Imports to fall'
However, thanks to the extent of the corn stockpiles, and the
prospect of a record harvest this year of 220m tonnes, Chinese imports of the
grain "are likely to decline" in 2014-15, the council said, explaining its
downgrade last week in its estimate for buy-ins by 1.5m tonnes to 3.0m tonnes.
China's corn imports this season are expected to end up at 4.8m
The council also cited the impact of China's rejection of cargoes
of corn - and of distillers' grains (DDGs), a feed ingredient derived from corn
- alleged to have traces of MIR 162, a genetically modified Syngenta variety
approved in Washington but as yet not in Beijing.
"With China previously accepting corn and DDG imports containing
the trait, there remains much speculation that the tightening of custom restrictions
may be linked to the country's seemingly ample feed grain supplies, including large
China's corn imports are a particularly sensitive market topic, with the country long forecast to require large purchases, but as yet avoiding them, in part thanks to constraining growth in some industrial uses, such as ethanol production.
'China's influence is
The forecast of weaker corn imports tallies with a theme
identified by Australia & New Zealand Bank of smaller buy-ins by China of
many agricultural commodities.
"China's influence across agricultural markets is waning,
and not driving prices like in 2011," ANZ analyst Paul Deane said.
In sugar, high stocks - which ANZ forecast ending this year at
some 8m tonnes, the highest since at least 2003 – "could see weaker import demand
In the beverage market, "a government crackdown on spending
by officials on gifts and banquets has resulted in wine imports falling
year-to-date for the first time since 2009," Mr Deane added.