WATCH OUT FOR WORLD'S #2 CORN GROWER: CHINA

After the U.S., China is the second-largest corn grower in the world, but its stockpiles are twice the U.S. inventory. Dan Basse, head of the private consultancy AgResource Company in Chicago, says China is “awash in corn. I believe China will be back in the corn export market within one year.”

The exports would be relatively small – there is market talk of 2 million tonnes in a world market of more than 140 million tonnes – and an outgrowth of Chinese farm-subsidy reforms and Beijing’s efforts to work down government-held reserves. Domestic prices are drifting closer to international shipping rates, Basse said during a luncheon at USDA’s Outlook Forum. Port disruptions at major exporters or a change in exchange rates could provide the opening for sales, he said.

USDA economists say the impact of China’s evolving farm policy “is still not entirely clear.” In a sidebar to USDA’s long-term baseline, they note that China has allowed prices to fall by up to 30% over the past few years for cotton, soybeans, rapeseed, “and now corn prices,” although wheat and rice supports remain. “The removal of the corn support price could encourage a modest shift in acreage from corn to competing crops in coming years,” such as soybeans, spring wheat, and fodder crops.

China has throttled back on imports of corn, sorghum, and DDGs in the face of a corn surplus equal to a six-month supply at the start of this marketing year. Still, USDA projects corn imports of 3 to 4 million tonnes annually in the near term.

“Despite a slowdown in consumption of many commodities, China’s soybean exports are projected to be a record 86 million tonnes during 2016/2017, as falling international prices stimulated Chinese consumption,” say the economists. “Soybean imports are expected to rise to 121 million tonnes during 2016/2017.”

This article was produced in collaboration with the Food & Environment Reporting Network, an independent, nonprofit news organization producing investigative reporting on food, agriculture, and environmental health