Hopes for Chinese corn imports questioned

One analyst reports the country’s reserves are almost depleted, but others argue these expectations never materialize

Potentially explosive corn market news out of China needs to be taken with a grain of salt, say industry analysts.

Dim Sums, a web blog that provides analysis on China’s agriculture markets, is reporting that China has reached a tipping point where its corn reserves are going to be depleted in 2020.

That would mean the Asian giant could soon become the ravenous corn importer many industry officials have been patiently waiting to emerge.

An analysis by China’s Grains and Oils News has proclaimed that 2020 is going to be “an historic transition year” for China, according to Dim Sums.

“This year is hailed as the finale for the temporary reserve price support program that accumulated a huge glut of corn that has been dumped back into the market since the program was ended in April 2016,” said the blog.

Grains and Oils News estimates that China’s reserves are down to 40 million tonnes, which is in stark contrast to the U.S. Department of Agriculture’s 2020-21 ending stocks estimate of 198 million tonnes.

Dim Sums reported on another analysis conducted by BRICS that China’s annual corn deficit is 25 to 40 million tonnes and that the country’s reserves will disappear in 2020.

“BRICS expects 10 to 20 million tonnes of corn, sorghum, barley and DDGS to be imported,” stated the blog.

A grain industry analyst, who requested anonymity due to commercial concerns, said U.S. exporters have been waiting for the day China becomes a big net importer of the crop ever since the country’s ascension to the World Trade Organization.

But it never happens.

“We have not been able to knock that house of cards down for more than 20 years and I can’t believe there is anything going on now that’s going to do that,” he said.

People tend to forget that China is committed to being self-sufficient in grain production while it has relented on oilseeds.

“I don’t know why, it just doesn’t sit well with a lot of people who don’t study it that China is self-sufficient in general on feed grains,” he said.

There will still be the occasional bump in demand when the domestic price of corn gets too high, but he believes the government always maintains an ample two-year supply of the crop.

The analyst doesn’t see a seismic shift in China’s corn policy on the horizon despite the fact that the government has been auctioning off a lot of its corn stocks lately and has abandoned its policy of propping up prices above US$9 a bushel.

He puts zero faith in any stocks number coming out of China because there are only a handful of people in the country trusted with that secret.

The only true gauge of dwindling stocks would be a sustained high level of imports.

“I’ve always been of the mindset that I’ll believe it when I see it,” he said.

Guy Allen, senior agricultural economist with Kansas State University, said he was in China between 2007 and 2009 trading corn for Louis Dreyfus.

The sentiment at that time was that China was on the verge of becoming a huge importer of the crop. It was going to happen very soon.

“It didn’t,” he said.

Allen is also skeptical about the Dim Sums report that things have once again reached the tipping point, especially considering that the country’s corn demand has plummeted recently due to African swine fever.

However, he does think it will happen at some point in the near future.

“I would concur with the premise but not the timing,” he said.

When it does happen he expects the situation to evolve like it did with soybeans where China gradually imports more and more.

It might start with the country buying five to 10 million tonnes a year, which would have a modest impact on corn and related grain prices.

Allen said you never know, maybe China is running out of corn and that is why it signed the Phase 1 agreement with the U.S. Maybe large volumes of corn will start heading overseas.

“Until it starts to happen, I’d be skeptical,” he said.

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