February 24, 2011

 

China's corn reserves historically low; wheat adequate

 

 

China's corn stocks are at a historically low level that suggests large impending import volumes, but its wheat reserves are likely sufficient to ride out even a crop failure this year, Standard Chartered said Wednesday (Feb 23).

 

Reserves of key grains are closely watched as an indicator of the country's potential import appetite, though it strives for self-sufficiency.

 

The corn stocks-to-use ratio - an indicator comparing grain reserves to its consumption levels - is at 37% in the 2010-11 season, well below an average 93% between 1993 and 2003, according to USDA data.

 

While the ratio in the current crop year ending October 31 is the highest since 2002-03, it has risen above the five-year average of 29% mainly because of high import levels in 2010.

 

"This indicates that larger imports will be required to reverse the decline in China's corn stocks," analysts said.

 

However, China is faring better with its wheat reserves, they added.

 

Standard Chartered estimates carry-out stocks at 60 million tonnes, implying a stocks-to-use ratio of 55%, compared with a global ratio of 26.8% in 2010-11, supporting the view of the government and the USDA that China has enough wheat reserves to cope with an ongoing drought.

 

However, crop failure in the event of drought may cause China's wheat harvest to drop to 98 million tonnes from 114 million tonnes last year, which would tighten the stocks-to-use ratio to 45%.

 

This would be a significant decline from 2010-11 and would increase the likelihood of imports by China, analysts said.

 

While the bank does not believe China is about to rush into wheat purchases, it expects China to buy opportunistically, as it is now doing with its purchases of competitively priced Australian feed wheat.

 

This year, four cargoes of around 200,000 tonnes of feed wheat have already been sold to Chinese buyers led by state grain trader Cofco Ltd, reports said.