US farm officials hiked their forecasts for China's corn imports, a particularly sensitive topic for grain markets, saying that growing demand from processors and livestock farmers will raise them six-fold over the next decade.
The US Department of Agriculture, in a much-watched annual briefing on long-term crop estimates, introduced wholesale changes to forecasts for Chinese corn purchases - forecasting they will account for 45% growth in world trade in the grain in the decade to 2021-12.
The change in growth rate placed Chinese corn imports, estimated at 3.0m tonnes in the current marketing year, at 16.0m tonnes in 2020-21 - twice as much as the USDA estimated them at a year ago.
They will rise further to 18.1m tonnes the following season, making the country the top importer of the grain, ahead of Japan and Mexico, a scenario not envisaged in previous USDA reports.
"China's strengthening domestic demand for corn is driven by its expanding livestock and industrial sectors," the USDA said, placing China among countries set for strong production in animal numbers but "unable to meet their own feed needs".
Impact on exporters
The forecasts reflect a departure from what have been perceived as a conservative attitude towards Chinese corn consumption by the USDA, whose data are viewed as world benchmarks, and so closely watched by markets.
Ideas for Chinese corn imports are viewed with keen interest by investors given the country's huge potential for importing the grain, as the second-largest consumer and producer, but with its output prospects constrained by land limitations and, up to now, relatively poor yields, limited by factors such as seed quality and inefficient farming practices.
China corn imports, as estimated by the USDA today and (a year ago)
2010-11: 1.0m tonnes, (1.0m tonnes)
2011-12: 3.0m tonnes, (1.2m tonnes)
2012-13: 4.0m tonnes, (1.8m tonnes)
2015-16: 7.5m tonnes, (4.1m tonnes)
2017-18: 10.8m tonnes, (5.8m tonnes)
2020-21: 16.0m tonnes, (8.0m tonnes)
2021-22: 18.1m tonnes, (n/a)
China's demand will see its purchases from the US soar, the USDA said.
"Export gains are particularly strong to China, which accounts for almost half the overall growth in global corn imports [over the decade ahead]," the USDA said.
This will keep US corn exports firmer than had been thought, creeping to more than 2.4m bushels, "close to record levels", by the end of the decade, even though America's share of world trade will be weaker than had been previously thought, and set to fall below one-half.
"The US share of world corn trade declines slowly from an average of about 55% during the last half decade to less than 47% by 2021 as exports rise more rapidly from the countries of the former Soviet Union, Brazil, the European Union, and other European countries," the USDA said.
Nearer-term, the document, which predicted that "high levels of domestic corn-based ethanol production and gains in exports" will stoke "high" demand for US corn, forecast domestic sowings rising by 2.1m acres to 94.0m acres this year.
The figure, while the highest since World War II, is in line with existing market estimates, including a forecast from Morgan Stanley earlier on Monday.
USDA initial forecast for 2012-13 corn and (change on 2011-12)
Sowings: 94.0m acres, (+2.3%)
Harvested acres: 86.8m acres, (+3.3%)
Yield: 164.0 bushels per acre, (+11.4%)
Production: 14.235bn bushels, (+15.2%)
Feed, residual use: 5.225bn bushels, (+13.6%)
Ethanol use: 4.950bn bushels, (-1.0%)
Exports: 1.875bn bushels, (+10.3%)
Year-end stocks: 1.623bn bushels, (+103%)
Comparison between USDA baseline forecasts and Wasde data. Source: USDA
The USDA was, however, more optimistic on yield, saying the harvest would come in at 164 bushels per acre, compared with a Morgan Stanley figure of 160 bushels per acre.
The extra corn acres will come in part from conservation land, but also from soybeans, which were seen planted on 74.0m acres, down 1.0m acres year on year.
Cotton acreage was also seen falling, by 2.4m acres, or 17%, to 12.0m acres, well beyond the 7.5% decline envisaged in a National Cotton Council report published over the weekend.
The USDA long-term estimates have a mixed record of success. Last year's document predicted US corn sowings within 100,000 acres of the final result.
However, it overestimated soybean sowings by 3.0m acres, and wheat acres by 2.6m acres, failing to factor in poor spring sowing conditions which prevented many farmers from completing planting programmes.
The data, which are largely down to estimates made late last year, are up for revision at a USDA conference next week.