Drop in Chinese corn sowings to speed drive to shrink stocks


China will in 2017-18 make huge progress in its effort to cut its hefty corn inventories, helped by the first back-to-back declines in sowings in nearly a quarter of a century – although that does not mean a reprieve for barley and sorghum imports.

The US Department of Agriculture, in its first forecasts for world grains balance sheets in 2017-18, forecast China's corn stocks ending the season at 81.3m tonnes.

While still by far the world's largest, accounting for 42% of the global total, inventories at that level would be down 20m tonnes year on year, and at their lowest since 2012-13.

They would be down more than one-quarter from the high reached in 2015-16, when China accounted for 52% of world corn inventories – a glut which prompted reforms, including a shake-up of farm subsidies and incentives for corn users, aimed at cutting the stocks.

At current world market values, the stockpiles, at their height, would have been worth more than $17bn.

Corn sowings drop

The forecast progress in eroding the inventories reflects in part expectations that Chinese farmers will for a second successive season cut corn sowings, this time by 4.8% to a six-year low of 35.0m hectares, according to the USDA.

"Farmers started reducing corn area in 2016 in response to government policy changes and lower market prices," the USDA said.

The area decline, which would represent the first time since 1993-94 that Chinese growers have cut corn seedings for a second successive season, was greater than that forecast separately on Wednesday by China's agriculture ministry, which pencilled in a 2.4% drop.

However, it was in line with an estimate earlier this year by China's National Bureau of Statistics, based on a survey of growers' intentions.

The USDA forecast Chinese corn output this year at 215.0m tonnes, marginally ahead of the 213.2m-tonne estimate by the country's own agriculture ministry, despite the lower sowings estimate.

Demand boost

Meanwhile, the USDA forecast Chinese corn consumption rising by 6.0m tonnes year on year to a record 238.0m tonnes in 2017-18

"Feed and residual use is expected to increase based on continued relatively low internal market prices, efforts by the government to promote use of domestic supplies, and reduced imports of corn substitutes," the USDA said.

China has, amid dumping claims, slapped heavy tariffs on imports of US distillers' grains (DDGs) the feed ingredient derived from corn ethanol manufacture.

Barley, sorghum imports

Beijing's focus on cutting its domestic stockpiles has also been a setback for imports of rival feed grains, which have lost some of their appeal to Chinese buyers as domestic corn prices have tumbled, thanks to the ditching of guaranteed prices to growers.

However, the success forecast for China's stocks drawdown next season does not mean a reprieve for imports of the likes of barley, seen falling to a five-year low of 4.5m tonnes next season, and sorghum

"Imports for both barley and sorghum are projected to fall sharply," the USDA said.

"The government's effort to promote the use of domestic corn is expected to limit import demand."

The USDA also flagged "tighter global supplies" of both grains, seeing sorghum inventories end next season at an 11-year low of 4.22m tonnes, while barley stocks drop below 18m tonnes for the first time in 34 years.


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