October 8, 2012


US Grains Council forecasts strong China corn crop



Buoyed by higher yields and an increase in planted acreage, the US Grains Council (USGC) projects another good Chinese corn crop during the 2012 China Corn Harvest Tour.


Persistent reports of weather and pest problems in some areas this summer, plus recent typhoon impacts in north eastern China, had raised concern about potentially significant yield reductions. The Council's survey, however, suggests that the impact of these events is relatively small. While the final harvest will fall short of best-case expectations, it will be another record year for China corn.


"The US drought and short 2012 crop are pressuring buyers in all sectors," said USGC President and Chief Executive Officer Tom Sleight. "But corn trades in a global system, and the safety net is the capacity of other producers to step up.


"The US is by far the world's largest corn producer and exporter, but in a tough year for US corn, it is a relief that the world's number two producer is having a good year. That will help limit demand destruction and preserve markets for US corn as we rebound next year."


China is the world's second largest corn producer and until 2010 was an export competitor of the US in Asian markets. In 2010, however, China became a structural corn importer, and last year purchased nearly 5.2 million tonnes (205 million bushels) of corn from the US, making it the third largest US export market.


"Continued growth in China's economy and individual income growth will continue to drive increases in meat consumption and animal feed demand," said Bryan Lohmar, the USGC director in China. "But a good harvest this year, plus the forward purchases they have already done for the 2012-13 marketing year, gives China some breathing room in a very tight global market. China will likely be strategic in its purchases this year, entering the market to build reserves if and when prices dip."


The USGC Harvest Tour is comprised of teams of industry experts who visited China's seven top corn production provinces in the North China Plain and Northeast China. These account for over 70% of China's corn production. In addition to crop conditions, the council's teams observed increased corn acreage, which has increased in China at the expense of cotton and soy acreage. While some insect and weather damage was apparent, the overall crop looks good, and is expected to again set a Chinese production record.


The 2012 Tour was conducted from September 10-28, and included representatives from major grain traders, the Chinese feed industry, US and Chinese market analysts, US corn producers, the US embassy, and USGC staff.