September 3, 2020

 

China facing food security issues over corn shortage

 

Rising corn prices are fueling food security concerns in China, with food inflation rising to record levels and President Xi Jinping calling for a stop to food wastage, Reuters reported.

 

The rising prices of corn, essential to feed China's swine, dairy and poultry industries is the next biggest issue in the country following an African swine fever outbreak, COVID-19 pandemic checks on food imports and possible food supply gap problems.

 

Analysts and traders said corn prices have gone up as China faces its first corn shortfall in years for the 2020 / 2021 season beginning October, with up to 30 million tonnes in deficit.

 

Major corn exporters such as Ukraine and the United States could see higher demand from China, but this demand could result in surging global prices. In addition, it could see corn users switch to cheaper grains.

 

Four years ago, China stopped a measure that paid above-market prices to corn farmers due to bulging stockpiles and has produced less corn than it consumes since then. State corn stockpiles have been nearly depleted.

 

Jiamusi, a prefecture-level city in eastern Heilongjiang province,is the heart of China's grain basket. Corn prices there have reached CNY 2050 (~US$300; CNY 1 = US$0.15) a tonne on August 26. This is a 26% increase compared to earlier this year.

 

The rising price of corn has pushed food prices up, but this was also due to major floods in south China, drought on the northern grain belt and dwindling pork supplies.

 

China President Xi Jinping called on the country to stop food wastage, with local governments announcing related campaigns.

 

China's agriculture ministry projects a bumper corn harvest of 266.5 million tonnes for the 2020 / 2021 season, but this is far from meeting rising demand. The ministry projects year-end stocks at minus 16.7 million tonnes.

 

Five analysts and traders told Reuters that the shortfall could rise to 30 million tonnes, surpassing the country's current seven million tonnes import quota.

 

China's National Development and Reform Commission did not reply to a Reuters' enquiry about amending grain quotas.

 

There is a possibility that corn will be substituted as China has plentiful supplies of other staple grains, plus imports of barley and sorghum.

 

Darin Friedrichs, StoneX Shanghai senior analyst said based on China's increased US corn purchases, it is possible that China will amend its quota but roughly at about 10 million tonnes for 2021.

 

A government think-tank researcher, who did not want to be named as he was not allowed to speak to the media said feed wheat use could go up to 20 million tonnes in the 2020 / 2021 crop season, compared to five million tonnes in previous years and 15% of production.

A trading firm executive told Reuters that China is buying more corn because international market prices are cheap. China had recently booked its biggest US corn purchase last week as it looks to meet its pledge signed in the US – China Phase 1 agreement.

 

-      Reuters