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Quality woes to buoy China wheat imports - and dog corn demand
By Mike Verdin - Published 15/12/2016

China's wheat imports will rise further than had been expected this year, thanks to poor quality a problem too for old-crop corn stocks, which thanks to fungal toxins "may not be suitable for processing or feed".

US Department of Agriculture staff in Beijing pegged China's wheat imports in 2016-17 at 4.0m tonnes 500,000 tonnes above the USDA's official estimate and a figure well above the country's average buy-ins.

Indeed, it would be the third highest imports of the last 20 years, behind the total of a little above 6.7m tonnes purchased in both 2004-05 and 2013-14.

The forecast reflected the damage to wheat from harvest-time rains which "downgraded crop quality and yields across East China's wheat-growing provinces including, Jiangsu, Hubei and Anhui".

'Sprouted, unsound kernels'

Official data peg at 8% of the national harvest the proportion of "sprouted, unsound, and musty kernels" as a result of the late rains on ripe crops, up from 5.5% last year.

However, "industry sources report that the actual share of damaged grain may be greater than reported".

In Henan, the top producing province, and Anhui, Hubei and Jiangsu, also in the east of China, where wheat was "seriously impacted" by the poor weather, sources are reporting that "much as 24% of the crop may be out of condition.

Indeed, in Anhui and Jiangsu, state grain procurement elevators are reporting a "rejection rate of 20%" of crop submitted.

'High levels of mycotoxins'

For corn too, quality is proving an issue at least for supplies held over from previous years.

"Industry sources report that temporary reserve corn supplies are not suitable for feed use."

"Old-crop corn supplies sold at auction are out-of-condition and have been tested to contain high levels of mycotoxins," that is, toxic residues from fungal crop infections.

These toxins mean the crop "may not be suitable for corn processing or feeding", the bureau said, if adding that corn from this year's harvest is meeting feed mill specifications.

'Diminishing price competitiveness'

An increased estimate for crop loss, combined with a boost to demand from increasing demand from pork and poultry producers, prompted the bureau to hike to 234m tonnes its forecast for China's corn consumption in 2016-17.

That figure is 8m tonnes more than the USDA's official forecast, and represents a rise of 16.5m tonnes year on year.

However, the bureau pegged China's corn imports this season at a modest 1.0m tonnes a six-year low, and 2.0m tonnes below the figure the USDA is forecasting.

The bureau flagged "diminishing price competitiveness for imported corn", as the removal of China's guaranteed price regime for farmers, amid a subsidy shake-up, undermines domestic values.

Instead, the extra draw on China's own supplies will allow the country to make extra headway in its drive to erode its huge corn stocks, with the bureau pegging inventories at the close of 2016-17 at 101.8m tonnes, a drop of 15.0m tonnes year on year.

Agrimoney has published an in-depth report on China's current situation, China 2017: Agricultural Deregulation and Its Global Impact. More information: www.agrimoneyresearchreports.com

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