March 8, 2010

China grain estimates seen as exaggerating


Widely-used estimates of China's corn and wheat production may be 13.5 million tonnes too high thanks to data distortions encouraged by an internal subsidy regime, according to US officials.

US government attaches in Beijing have slashed their estimate of the 2009-10 wheat harvest in China to 106 million tonnes, highlighting instead the damage to yields caused by drought, disease and late rains.

The figure is 8.5 million tonnes lower than the estimate in the USDA's benchmark global crop supply and demand report, which takes into account official Beijing data. The attaches' report also stood by an estimate of 150 million tonnes for Chinese corn output last year, five million tonnes shy of the current USDA figure.

The discrepancies reflect a subsidy programme which pays provinces by reported production, the attaches said, restating a warning issued last year over the accuracy of official Chinese crop data.

To gain more financial aid from the central government, provincial government authorities are occasionally tempted to overstate their grain production even if the crop was impacted by adverse weather, said the report.

The attaches pegged China's wheat inventories at the end of 2009-10 at 52.3 million tonnes, still showing an increase year on year, but 8.5 million tonnes below the official USDA estimate.

The report forecast rises in China's production of both corn and wheat for 2010-11, reflecting an assumption of a return to average yields for both crops.

Planting area of grains, including rice, is set to increase by 1%, buoyed by government support but hindered by decreasing arable land in China, the attaches said.

Although China has cleared one variety of GM corn for farm use, and two types of biotech rice, they are not expected to be planted on a commercial scale for at least two years.