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Record Corn Crop Unlikely to Meet Demand

by 5m Editor
4 November 2011, at 10:43am

CHINA - China reaped its seventh record corn crop in eight years during the harvest now ending but that will be insufficient to meet demand, driving a five-fold gain in imports as prices head for the highest-ever annual average.


Farmers in Shenyang, Liaoning province, harvest the corn crop. The country's demand for corn has risen 50 per cent since 2000 while the harvest grew by 38 per cent.
[Photo: China Daily]

Production reached 189.2 million tons in the harvest that began in September, which was 6.7 per cent more than a year earlier, according to a survey of growers in the seven main producing regions carried out by Geneva-based SGS SA for Bloomberg. Imports in the marketing year that began last month may jump to 5 million tons from 1 million tons, according to the median estimate of 10 analysts and traders surveyed by Bloomberg.

While the supply predicted in the SGS survey would exceed the estimates of the US Department of Agriculture (USDA) by more than 7 million tons, rising imports show that farmers are failing to grow enough grain for livestock feed. The fivefold expansion in China's economy in the past decade reported by the World Bank has spurred a change in diets. The dairy herd has almost tripled since 2000, and per capita pork consumption rose 26 per cent in the nation of 1.34 billion people, USDA estimates show.

"It's an amazing crop, but demand is just too strong," said Dan Cekander, director of research at Newedge USA LLC in Chicago, who toured cornfields in Jilin Province, the top grower, during September. "Everybody has been projecting a record crop, and yet domestic prices are historically high, and the Chinese government just bought US corn."

Corn futures on the Chicago Board of Trade rose 2.3 per cent to $6.4325 a bushel this year and averaged $6.90, heading for the highest-ever annual figure.

The grain will probably reach $7.25 in the first quarter, Cekander said. Prices in Jilin jumped 17 per cent and touched a record 2,430 yuan a ton ($9.67 a bushel) on Sept 19, according to Shanghai JC Intelligence Co, the nation's biggest independent agricultural researcher.

On 13 October, the USDA announced that China bought 900,000 tons of corn, the most since a 1.45 million-ton purchase in 1994.

Corn outperformed this year's 14 per cent drop in the Standard & Poor's GSCI Agriculture Index of eight commodities and the 8.2 per cent decline in the MSCI All-Country World Index of equities. Treasuries returned 8.8 per cent, Bank of America Corp indexes show.

Chinese demand has risen 50 per cent since 2000 as output gained by 38 per cent, according to USDA data. Only the US grows and uses more. China, which became a net importer for the first time in 14 years in 2010, is "entering a golden age for consumption," Morgan Stanley analysts led by Hussein Allidina said in a report 25 October.