November 13, 2015


High corn prices led to surge in Chinese imports of alternative feed grains


High domestic corn prices in recent years have led to a massive surge in Chinese imports of sorghum, barley and distillers dried grains with solubles (DDGS) as feed mills searched for alternatives, the US Department of Agriculture (USDA) said.


A grain and feed update report prepared by the USDA Foreign Agricultural Service's Beijing Post said combined imports of the three alternative commodities reached 25.6 million tonnes in marketing year 2014-15 from only 5.6 million tonnes in MY 2012-13. 


Feed millers' increased use of sorghum and other alternative feeds has resulted in lower forecast for corn feed and residual for MY 2014-15 and MY 2015-16. Despite this, another record corn crop is expected, and ending stocks for MY 2015-16 may reach 117 million tonnes. Other industry estimates go as high as 170 million tonnes.


"In response to the increasingly untenable (corn) stock situation, the government announced a 10 percent cut in the floor price for corn in September 2015", the report said, adding it was the first time the government cut the floor price for corn since 2008.


The report said the government has also become stricter on quality requirements for state purchases and that farmers who can't meet these standards have to sell their corn on the market at a discount.


Lower sorghum imports


The lower corn prices will hopefully help corn-feed use to recover in MY2015/16 and reduce imports of sorghum and other alternative feed ingredients. Thus, forecast for sorghum imports in MY 2015-16 was lowered by 4 million tonnes to 7 million tonnes.


Despite the reduced support price, corn remains an attractive option for most growers when compared to alternative crops, the USDA-FAS said. Thus, corn production in MY 2015-16 is forecast to remain at 225 million tonnes.


For MY 2014-15 wheat feed and residual use is revised down 1 million tonnes to 16 million tonnes on continued weakness while that in MY 2015-16 is forecast to further drop to 14 million tonnes as the recent cut in corn prices is expected to speed up the substitution of corn for wheat in animal feed, the USDA-FAS report said.


The report said sorghum imports in MY 2015-16 are forecast to fall to 7 million tonnes as falling corn prices are expected to sharply reduce demand for this commodity and other alternative feeds. It added estimated sorghum imports in MY 2014-15 are unchanged at 10 million tonnes.-Rick Alberto

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