Grains market monitoring China drought as July imports rise

China grain imports, most of which rose sharply in July, could increase further if a worsening drought in some of the country key producing regions affects crops in the weeks and months ahead, analysts said Monday (August 24).

 

Around 21 million acres of arable land is now under threat in China five northern provinces of Inner Mongolia, Xinjiang, Jilin, Shanxi, and Liaoning, which together account for around 30 percent of the country total grain output. The autumn crop makes up around 70 percent of the country total grain production.

 

China imported 4.39 million tonnes of soy in July, up 25 percent from a year earlier while wheat imports surged to 85,078 tonnes compared with only 373 tonnes a year ago, data issued Monday by the General Administration of Customs showed.

 

While the spike in most imports was largely due to high local prices and comparatively favourable global prices, imports could remain steady if the drought impacts crops going forward, analysts said.

 

"China is generally self-sufficient in grains and, with regards to corn, large carryover stocks suggest that it can weather a moderate drop in output," Standard Chartered said in a recent commodities outlook report.

 

"However, poor weather and the need to maintain stocks at current levels may yet prompt China to source some corn from external markets. We estimate that an import volume equivalent to only 5 percent of China domestic corn requirement of around 158 million tonnes would make China the largest corn importer."

 

Corn imports in July, however, fell 22 percent to 11,136 tonnes, the data showed.

 

 

"It hard to say by how much China crop output will be affected by the drought, or what real impact that may have on the market," said Genichiro Higaki, a commodities analyst with Sumitomo.

 

"Soy is leading the grains complex higher. Psychologically, the outlook is pretty firm due to the bullish data today out of China, though the market will soon start to focus on the next USDA supply and demand report, which is due Sept. 11," he said.

 

At 0551 GMT, e-CBOT November soy contract was up 20.00 cents at US$9.93/bushel, while the November rice contract was up 17.50 cents at US$13.55/hundredweight.

 

Corn and wheat were also trading higher; December corn was up 2.40 cents at US$3.28/bushel, while December wheat was up 2.60 cents at US$4.90/bushel.