September 12, 2014

Drought cuts China's corn output by 2.2%

China's corn production this year could drop 2.2% to 213.8 million tonnes, according to the China National Grain and Oils Information Center (CNGOIC), an official think tank.

The think tank attributes the production shortfall to a long drought that damaged crops in its three northeast provinces.

The US Department of Agriculture, in its latest World Agricultural Supply and Demand Estimates (WASDE) report issued Thursday, forecasts China's production shortfall for 2014/15 to be around5 million bushels.

Yet, despite the predicted drop, its first since 2010, this year's cornproduction, whose last harvest for the year is due next month, would still "represent China's second highest output" ever.

Despite lower output,corn supply in the country will remain robust, according to analysts. With more than 60 million tonnesin state reserves, the world's second biggest corn consumer after the US will even have supply surplus at the end of the day, they said.

Since May, the government has been trying to unload some of its corn reserves in the run-up to the harvest season. But only 27 million tonnes from the reserves - or less than half of the volume on offer -- have been sold so far, analysts said.

CNGOIC attributed the weak sales to the high floor prices the government hadset for its corn reserves and to weak downstream demand.

"State reserve corn is very expensive while demand is not that good," said Ma Wenfeng, an analyst with Beijing Orient Agribusiness Consultants Ltd.

Consequently, CNGOIC cut China's corn consumption estimate for 2014/15 by 2 million tonnes to 189 million tonnes "due to lower-than-expected demand from the livestock industry."