May 25, 2011

 

 

China raised its output projections across major grain categories for the year, with corn production leading the way with a forecast 2.5% rise, the state-backed China National Grain and Oils Information Centre (CNGOIC) said Tuesday (May 24).

 

The agency's May forecast indicates that policy efforts to maintain or increase self-sufficiency in grains - corn, wheat, rice and tubers - while allowing for more imports of oilseeds, such as soy and rapeseed, are having the intended effect.

 

Corn output is projected to see by far the largest increase among the key grain categories, rising to 181.5 million tonnes, the CNGOIC said.

 

Wheat and rice output will grow more modestly, it said, with wheat production likely rising 0.3% to 115.5 million tonnes and rice output growing 0.9% to 197.6 million tonnes.

 

The higher output projection for corn comes after a sustained period of government sales of the yellow grain in a bid to restrain downstream inflation.

 

"The desire for China to rebuild grain stocks through corn imports remains high," analysts said. "Since July 2009, China is estimated to have released 44 million tonnes from temporary and strategic reserves."

 

In March, state stockpiler China National Grains Reserves Corp stepped into the market to buy one million tonnes of US corn as global prices fell.

 

"This is one of the first examples of what will become increasingly common and paving the way for a new dynamic in global grain markets - China 'buying the dip' in 2011 and beyond," experts said.

 

While projected declines in China's corn output may have been contained by rising corn productivity, "this will not, however, dissuade the market of a potential increase in China's corn imports in the coming season, given China's relatively low corn stocks-to-use ratio," said Standard Chartered analyst Abah Ofon.

 

Based on USDA data, Ofon estimated this ratio, an indicator of how much corn China held in store as a proportion of its consumption, at around 35.7% in 2010-11, down sharply from 85% in 2000-01.

 

"There have been tangible stock draw-downs this season, and we believe a number of importers will be looking to restock their silos," he added.

 

Corn imports in April nearly doubled on-year, data from the General Administration of Customs showed this week, even as imports in other grain categories fell on the back of weaker demand in China.

 

Sinograin, as the state stockpiler is known, has no current plans to import more corn, said spokesman Cheng Bingzhou, but state traders said China may re-enter the market if US corn prices fall again.

 

Meanwhile, higher prices have helped boost domestic acreage in most categories. Corn acreage this year will likely rise 2% to 33.1 million hectares, while rice acreage may rise 0.8%, the CNGOIC said Tuesday.

 

Wheat acreage may fall 0.3% to 24.3 million hectares, largely due to a smaller spring-planted crop, the agency said.

 

Among oilseeds, domestic output and acreage were likely to continue falling, it said.

 

Soy production this year may slip 7.9% to 14 million tonnes, while rapeseed output may fall 2.2% to 12.8 million tonnes.

 

While soy imports slumped in April, Ministry of Commerce forecasts show soy imports may recover this month, as trading companies continued to import the commodity to take advantage of favourable financing options linked to such imports, mainly for construction-related financing purposes.

 

Port stocks of soy have reached near-historic levels of about seven million tonnes.