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IGC flags 'question marks' over China's corn supplies, as imports rise

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The “question marks” over China’s grains supplies posed by the likes of rising imports could be a sign of tighter-than-estimated stocks, the International Grains Council said, amid wide-ranging comments on world grains.

 

Amy Reynolds, economist at the intergovernmental group, said that after the IGC revamped its China grain estimates some five years ago, “we are potentially coming into another time when we need to have a close look at China’s supply and demand balance for maize, potentially for wheat as well.

“One of the things we are monitoring in terms of China is the level of stocks,” she told an Agrimoney webinar, adding that “it is very difficult to get a good idea as to what the size of China’s stocks are of any commodity”.

 

However, evidence suggested that “certainly over the last four, five, six years the pattern seems to be that maize stocks have been drawn down”.

 

Demand signals

Ms Reynolds, underlining the boost to feed demand from China’s recovering hog herd and expanding poultry industry, highlighted results of weekly state corn auctions, as started in late May.

 

“Sales out of there are already at 57m tonnes, that have been taken out of stocks to the domestic market, which certainly sems to imply that there is strong demand there,” Ms Reynolds told the webinar.

 

Furthermore, she noted that “we are starting to see a greater volume of imports.

 

“Some of the range of estimates that I have seen for [Chinese corn] imports over the coming season, 11m, 15m tonnes.

 

“There are reports that there have already been huge volumes booked for delivery in the 2020-21 season.”

 

‘Very high prices’

With Chinese corn prices “very high” - on Friday touching 2,373 yuan a tonne on the Dalian exchange for November, a fresh five-year high for a nearest-but-one-contract – “it is something that we do need to monitor closely.

 

“We do need to keep an eye on whether the market in China is telling us that the situation is tighter than we anticipate.”

 

The IGC currently sees China’s overall grain stocks at the close of 2020-21 at 312.6m tonnes, half the world total, including 172.2m tonnes of corn, equivalent to 60% of the global stockpile, although down 19.3m tonnes year on year.

 

China’s grain imports are pegged at 23.6m tonnes, including 7.0m tonnes of corn.

 

Market speculation

The comments come amid an enhanced market focus on Chinese imports of crops, and in particular of corn after a series of high-profile purchases from the US in recent weeks.

 

The US started 2020-21 this month with sales of more than 7.5m tonnes of corn to China on the books – already a figure which, if realised, would exceed the current record of 5.17m tonnes set in 2012-13, on US Department of Agriculture data.

 

At Chicago-based broker Futures International, Terry Reilly said that “there is more and more talk China will have to import well more than 10m tonnes of corn this crop-year”.

 

Steve Freed at ADM Investor Services said that “there is talk that China could import 30m tonnes of all-origins corn in 2021 and 2022”.

 

At Commonwealth Bank of Australia, Tobin Gorey too highlighted “the evolution of China to being a major buyer of corn,” highlighting too reports that the country is seeking to stockpile many commodities.

 

Reportedly, “China’s next five year plan (yes, China still has them) will include measures to significantly scale up their commodity reserves. That includes agri commodities like corn,” he said.

 

‘Tremendous change’

Arnaud Petit, the IGC executive director, told the Agrimoney webinar that international organisations, such as the IGC and the G20’s Amis, had gained a deeper understanding of Chinese crop dynamics.

 

He also highlighted China’s ability to alter its agricultural production dynamics, to great effect.

 

In rice, for instance, “China has made a tremendous change”, turning from a structural Importer to “a big exporter” of the grain.

 

The comments came in a wide-ranging webinar, which also included discussion of topics including Brazilian soybean sowings, the squeeze on world durum supplies, and European Union and US plantings ahead of 2021 harvests.

 

The free-to-view event can be watched by clicking here.

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